Angle PLC
LSE:AGL
US |
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
|
US |
Berkshire Hathaway Inc
NYSE:BRK.A
|
Financial Services
|
|
US |
Bank of America Corp
NYSE:BAC
|
Banking
|
|
US |
Mastercard Inc
NYSE:MA
|
Technology
|
|
US |
UnitedHealth Group Inc
NYSE:UNH
|
Health Care
|
|
US |
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
|
US |
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
|
US |
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
|
US |
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
|
US |
Visa Inc
NYSE:V
|
Technology
|
|
CN |
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
|
US |
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
|
US |
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
|
US |
Coca-Cola Co
NYSE:KO
|
Beverages
|
|
US |
Walmart Inc
NYSE:WMT
|
Retail
|
|
US |
Verizon Communications Inc
NYSE:VZ
|
Telecommunication
|
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
52 Week Range |
7.25
31.4
|
Price Target |
|
We'll email you a reminder when the closing price reaches GBX.
Choose the stock you wish to monitor with a price alert.
Johnson & Johnson
NYSE:JNJ
|
US | |
Berkshire Hathaway Inc
NYSE:BRK.A
|
US | |
Bank of America Corp
NYSE:BAC
|
US | |
Mastercard Inc
NYSE:MA
|
US | |
UnitedHealth Group Inc
NYSE:UNH
|
US | |
Exxon Mobil Corp
NYSE:XOM
|
US | |
Pfizer Inc
NYSE:PFE
|
US | |
Palantir Technologies Inc
NYSE:PLTR
|
US | |
Nike Inc
NYSE:NKE
|
US | |
Visa Inc
NYSE:V
|
US | |
Alibaba Group Holding Ltd
NYSE:BABA
|
CN | |
3M Co
NYSE:MMM
|
US | |
JPMorgan Chase & Co
NYSE:JPM
|
US | |
Coca-Cola Co
NYSE:KO
|
US | |
Walmart Inc
NYSE:WMT
|
US | |
Verizon Communications Inc
NYSE:VZ
|
US |
This alert will be permanently deleted.
Earnings Call Analysis
Q2-2024 Analysis
Angle PLC
ANGLE has announced a strategic pivot focusing on large pharmaceutical companies for its services, recognizing that smaller biopharma firms are facing funding constraints. The goal is to leverage the stable financial backing of large pharma, which often involves multi-program engagements. This shift is expected to enhance profitability and cash flow, particularly in light of challenges encountered in the product sales division.
In the first half of the year, ANGLE reported revenue of GBP 1 million, largely in line with the lower end of previous guidance. Operating expenditures were reduced by 13%, reflecting ongoing cost management efforts. The company also highlighted a solid cash position totaling GBP 17.9 million, which includes net funds raised of GBP 8.6 million, and expects an additional GBP 2.1 million from R&D tax credits. However, due to regulatory changes and reduced research grant funding, ANGLE has revised its revenue guidance for the full year to between GBP 3 million and GBP 3.7 million.
ANGLE has secured multiple contracts with large pharma, specifically three in the first half of the year, including significant engagements with AstraZeneca and Eisai. These contracts are projected to yield substantial revenues, with Phase II trials generating between GBP 1 million to GBP 4 million each and potential Phase III trials offering revenues of GBP 15 million to GBP 45 million each. The ultimate aim is to establish a companion diagnostic that could bring in revenues upwards of GBP 100 million per application.
Despite the positive outlook for pharma services, ANGLE is facing setbacks in its product sales division. The recent FDA oversight on laboratory-developed tests (LDTs) has caused clinical laboratories to pause or cancel their intended product launches. This has necessitated a strategic response to cut costs on the product sales side and redirect investments towards high-potential contracts with large pharma clients.
ANGLE is optimistic about long-term growth due to its robust pipeline. The company aims to expand its partnership footprint significantly, potentially increasing the number of large pharma contracts to 20. The introduction of a new dual analysis molecular assay is set to launch within six months, anticipated to drive sales forward and capitalize on the growing need for integrated cancer diagnostics.
A remarkable achievement noted was the company's 100th peer-reviewed publication, showcasing the efficacy of ANGLE's Parsortix system in retrieving circulating tumor cells. This milestone strengthens the credibility of ANGLE's technologies and serves as vital evidence for attracting further partnerships with pharmaceutical clients, which is essential in the data-driven medical sector.
Overall, ANGLE is undergoing a pivotal transformation focused on large pharma, which is expected to provide greater stability and higher revenue potential. Although short-term challenges in product sales are concerning, the company’s strategic allocation of resources towards high-impact contracts and innovative diagnostic solutions could lead to substantial long-term gains. Investors should pay close attention to the development of new assays and the establishment of more contracts within large pharma as critical indicators of the company’s market performance.
My name is Carlin. I'll be coordinating the call today.
[Operator Instructions] I'd now like to hand over to your host, Andrew Newland, CEO, to begin.
Good morning, everybody, and welcome to ANGLE's interim presentation for 2024. Welcome to the analysts in Berenberg's offices here in London and a very warm welcome to all our investors and shareholders who are on the webcast.
This is an important presentation. I'm intending to highlight some excellent progress in our Pharma Services business, which regrettably, however, has been weighed down by some challenging market conditions in our product sales business. And I'm going to explain the company's proactive response and the reason for our confidence in the new strategy, which is prioritizing large pharma investment in our large pharma strategy.
As usual, I'll present the main part of the presentation, and then we'll move to questions and answers from the analysts, where I'll be joined by Ian Griffiths, our Finance Director.
So what exactly is our large pharma strategy? So last year, we decided to focus on our Pharma Services business in large pharma companies. And that was because we saw that some of the biopharma companies, the smaller development companies who are developing new drugs that were our customer focus have been subject to some funding constraints. So with the new focus on large pharma, we're dealing with customers who have no such funding constraints, and they have many different programs that we can work on, not just one. So they're much more valuable relationships for ANGLE.
That said, they are significantly longer to actually secure the first contract and so there is a lot of work needed to execute this large pharma strategy. So I'm very, very pleased to say that it's going extremely well. And that's the most important message of this presentation. So I thought it would be sensible to highlight why the large pharma would, in fact, want to work with ANGLE in the first place. The issue is that next-generation blockbuster drugs and by blockbuster, I mean drugs that have the potential to generate multiple billion dollars of revenue per annum for their owners. These new blockbuster drugs need companion diagnostics.
There are new classes of drugs like antibody drug conjugates, DNA damage response inhibitors and immunotherapy combinations. And whilst they can be very, very good for some patients, they don't work for other patients. And consequently, there's a need for companion diagnostics to determine which patients should receive which drug. And this is of critical importance to the large pharma because unless they can prove that, they're unlikely to get regulatory clearance for their drug and they're unlikely to have a strong competitive position in their market.
And what's more, we now know that cancer evolves over time, called clonal evolution. And that means that information that's determined on the diagnosis of the patient becomes out of date. And so it's not really satisfactory to have -- although this is what is generally done at the moment to have companion diagnostics that are based on the tissue biopsy at the time of presentation of the patient. So by offering the Parsortix solution where we can recover intact cancer cells from the patient blood, we are -- for the ability for longitudinal monitoring of the patient and critically for the pharma, the assessment of the patient condition relevant to their drug at the time and point where the drug prescription is going to be made.
And so there are multiple business reasons, critical business reasons why large pharma would want repeat testing of intact cancer cells, the CTCs that our Parsortix system can provide. Those include competitive differentiation. So the better identification of the patient for the drug translates to a better response rate by the patient, reduced trial cost because they can find out sooner whether that trial is likely to be effective.
A higher probability of clinical trial success by selecting the right patients for those trials. An increased likelihood of regulatory clearance, higher reimbursement pricing because they can show that they're getting better responses with patients. And overall, obviously, the target is better with patient responses. So the whole idea of securing circulating tumor cells was intact living cancer cells from patient blood enables personalized medicine, which is the way that the whole industry is going. So we believe that the CTCs offered by Parsortix provides a unique opportunity for the pharma to build their revenues for the future.
So that's the background that we're playing into with our large pharma strategy. In terms of the first half of the year that we're reporting on here to the 30th of June '24, we have had success in 4 key areas. The first one is that from a standing start, we have successfully secured 3 contracts with large pharma in the first half. That is one with Eisai, the large Japanese pharma and 2 with AstraZeneca. We have also demonstrated some breakthrough D&A results. So we've published data that shows that if you analyze circulating tumor cells with a molecular sequencing, NGS sequencing, you can find DNA information, which is not available from circulating tumor DNA. And in fact, what we've demonstrated is that the 2 analytes, circulating tumor DNA fragments of dead cells and the circulating tumor cells recovered by Parsortix, which were intact living cancer cells are complementary and are additive.
And this is really, really important because pharma have invested quite a lot of money on circulating tumor DNA. And now there is a very clear rationale why they should enlarge that to also look at circulating tumor cells. Thirdly, in our protein analysis, which involves putting cancer cells on microscope slides, and then analyzing them for key proteins like HER2, phosphor KAP1, for example, which are both proteins that are large pharma are looking at.
We have discovered the need to improve the methodologies for putting rare cells down on microscope slides. And we've invented and got patented in Europe and the United States, a new approach that called the CellKeep slide, and that's having an impact on improving performance of the overall assays using Parsortix.
Fourthly, we completed in adverse funding environment conditions, one of the largest fundraisers in the sector this year, raising GBP 9.3 million gross in June 2024, and that was specifically secured to support the development of the 3 large pharma contracts that we already had in place. Since the period end, so post 30th of June, we've had continued progress. All the 3 large pharma contracts that we have in place at the moment have progressed well, and they're looking very promising to move to the next stage, which, of course, will be much larger revenues to ANGLE. So each one of those 3 is progressing well. And we've got very good customer relationships behind that.
We've secured a fourth pharma services agreement with Recursion Pharmaceutical and we think that's very interesting because they've got a lot of strong development partnerships with large pharma. So that can actually feed through to large pharma. And indeed, they're a $2 billion market cap company themselves. And behind that, we have a very strong pipeline of other large pharma that we are seeking to sign to get even more shots on goal.
As I mentioned, we had breakthrough D&A results in the first half, and that was using a DNA kit, which is provided by a company called NuProbe. We announced post period end that we have signed an exclusive deal to access that DNA kit. That covers a large number, 61 genes and 6,500 mutations of those genes, which are the clinically relevant oncogenes that the pharma are interested in. This is very, very significant because ANGLE has done a lot of work on multiple other partners, including from the market-leading NGS companies. And we found that their kits do not perform as well as the one that we now have exclusive -- an option for an exclusive license over.
We believe this will stimulate a lot of interest from pharma, and we have multiple discussions about the deployment of this panel. Now unfortunately, I said that the good progress in the first half has been weighed down by some disappointing signs in our product sales revenue. What's happened is that it's become very recently to our attention that the execution of the pipeline that we have has slowed down and in fact, very specifically clinical laboratories that we were in discussions with where we expected to make multiple sales are now pausing or, in some cases, canceling their plans for laboratory developed tests.
Now, this is a direct result, we believe, from the FDA -- the U.S. FDA regulatory clearance, taking oversight of LDTs, which was announced on the 29th of April this year. And on top of that, unfortunately, the research grant funding, which has been widely publicized as having been slowed down and delayed has continued to worsen. So those 2 things together mean that we don't now have as much confidence in the product sales side of pipeline delivering as previously expected.
In very proactive response to those conditions, we have made a strategic decision that we will prioritize our investment on the large pharma. The large pharma is going extremely well. The product sales is more challenged at the moment. We will continue to maintain support for our leading research use customers which is driving the body of evidence of peer-reviewed publications, but we will reduce our investment in favor of putting that money towards our product sales side, and we will cut costs as well.
And that will give us an increased focus on the large pharma. So effectively, what we're doing is backing our winners. In terms of the peer-reviewed publications, by the way, this is important. Data is the absolute key. Large pharma always want to see data about how the technology and the CTCs can be used. So we were extremely happy to announce today that we've got our 100th peer-reviewed publication, and I will talk more about that
In terms of the financial results for the first half, the revenue was broadly in line with guidance, albeit at the low end at GBP 1 million for the half year. The operating expenditure operating costs were reduced by 13%, which was as expected as we've been cutting costs in a number of areas. The cash position was good at GBP 17.9 million, and that included GBP 8.6 million net from the fund raise. And we have an R&D tax credit monies due in of a further GBP 2.1 million.
So in terms of the outlook, we've had to advise that we now don't expect to get the same level of revenues for 2024 as we had forecast because of the point that I made that there were specific contracts in the pipeline. We now do not expect to close in that time frame. So the revenue guidance is now GBP 3 million to GBP 3.7 million for the year. Note that, that does incorporate at least a doubling of H2 revenues compared to H1.
So we're not standing still. Of those revenues, we've got a solid order book of up to GBP 1.9 million, the majority of -- some -- a significant majority of which will be coming through in H2 and some in 2025 and beyond. So we believe that restructuring in the way that I've described to prioritize our investment on large pharma, it's not only the right thing to do, but it will put us in a strong position to deliver cash flow positive trading within the existing cash position that we've got.
And the big advantage of large pharma work is that the pharma pays for the development cost. They pay for the clinical trials, and we make money out of that process. When we get to regulatory, they will pay for regulatory, and they will be the customer, in many cases, for the companion diagnostic at the end. So it's in their interest because of the target of getting blockbuster drugs to market with revenue potential in excess of $1 billion to actually support and drive forward the companion diagnostic side for ANGLE. So it's a very different business. Then ANGLE seeking to swim alone and cover all the costs is funded by the partner.
And in terms of the rollout of that large pharma strategy, it's really important to recognize that the pilot projects that we have at the moment, which range from $250,000 to GBP 550,000, that is only a very small starter for [ 10 ]. Those pilot projects are expected to feed into Phase II trials in some cases, multiple Phase II trials. So AstraZeneca has got multiple programs in DDR that are assets applicable for and multiple programs in androgen receptor that our program is applicable for.
And those Phase II trials can be between GBP 1 million and GBP 4 million of revenue each to ANGLE. Assuming those Phase II trials are successful, obviously, not all will be, there's the prospect of Phase III trials, which could be a factor of 10 greater than that for ANGLE. So GBP 15 million to GBP 45 million of revenue for each Phase III trial. Remember, we've got 3 shots on goal at the moment, and 2 of those shots have got multiple potential individual shots themselves. But the real prize here is to get beyond those trials and when there's a clear drug is to get to a companion diagnostic position.
So companion diagnostic would mean, for example, that e-size drug in breast cancer, they would want every breast cancer patient to have this test in order to work out whether they would qualify for e-size drug. That's the scale that we're talking about. And we could be talking up to GBP 100 million of revenue for one companion diagnostic. And at the moment, we've got 3 shots towards that.
However, it's not just going to stay at 3. We're trying to get to at least 20, and we have many other large pharma that we're talking to. And more than that, we are talking about many other opportunities with the existing large pharma and that's great because the sales process for a new contract with the existing customer is much, much quicker as we saw with the AstraZeneca second contract, which came only within a matter of weeks after the first one.
So a little bit on each one of the large pharma contracts that we have in place already. Eisai, a large Japanese pharmaceutical company, revenues of around GBP 4 billion 10,000 employees. They have committed $2 billion of their investment to developing a new drug, which is a HER2 antibody drug conjugate. So what that means, ADC, or antibody-drug conjugate is a new class of drugs, all of which need companion diagnostics, where the ADC is targeted to attach to the cancer cell. And in this case, it's via using an antibody, which it fixes to the HER2 protein on the breast cancer cell.
So the idea for the patient is they have a drug. The drug goes right to the cancer cell, attaches to the HER2 and then releases its payload. That reduces the nonspecific toxicity associated with normal chemotherapy. But then there is a big but, does the patient's cancer express the HER2 protein? That's the critical question that Eisai needs to know. And in reality, in terms of diagnosis, when they're first diagnosed, patients have a HER2 cancer test. And what they'll find is about 20% are HER2 positive, about 20% are HER2 low and 60% are HER2 negative. But by the time this drug is going to be prescribed, which will be in later cancer, it is now known that 40% of patients will have changed their HER2 status. So there may be a lot of HER2 zero patients at presentation, who are now eligible for the drug if we have a way of determining the HER2 status. And similarly, the reverse may be the case. So the idea of the work with Eisai is that we're using the Parsortix system with a simple blood test, run it through Parsortix, recover cancer cells from breast cancer patients, and then we have developed a methodology and assay to test those cancer cells on a microscope slide for the HER2 protein.
The critical point is you can't do it with tissue biopsy because the patients already had a mastectomy or a lumpectomy. So you cannot repeat that. You can only wait until it's spread to the lungs or the liver. And then it's very invasive. And anyway, it's only one time point. So what we're looking at is a simple blood test taken at any relevant time point that the doctor chooses to determine whether the patient should have this drug, whether they would be eligible. And that's a critical element for Eisai because they're targeting a very, very large market for this drug, and they need to be able to show to FDA that they have got good patient response and that requires them to identify which patients should respond.
Now I mentioned that ADC is a new drug class. There was a recent large conference in Europe called ESMO, leading European Cancer Conference. ADCs were the absolute talk at the conference. Every pharma in the world pretty much is developing new ADCs. Some are targeting HER2 proteins, some targeting TROP2, some targeting a variety of other proteins. The methodology that we have developed applies equally well to all of these. We have to find the right antibody for the particular protein, and then we can deploy in the same way. And just to be clear, these companies do not expect to be able to get their regulatory clearance without some sort of companion diagnostic.
Existing HER2 drugs have got tissue-based biopsy companion diagnostic, but it's already been shown not to work very well. So that was the first one. And off the back of that one, we secured the second one, which was an AstraZeneca contract on DNA damage response. Again, this is actually another new class of drugs. So DNA damage response, it talks about the way that the cell repairs itself when it's damaged. So unfortunately, after chemotherapy, the cancer cells are damaged, they often manage to repair themselves and recover. So the new class of drugs is called DDR inhibitor which is a second drug that goes in with the chemo to block the repair pathways.
Now again, the challenge is what repair pathways are being used and what is the status of those? Now AstraZeneca very much liked the fact that ANGLE had developed for Artios, another one of our earlier biopharma customers continues to be a good customer of ANGLE, a DDR solution for Phospho-CAT 1 and they've asked us to extend that to look at micronuclei on the cancer cells. So basically, a way of looking at the cancer cells to look for these DDR pathways. We're in the process of development for them. It's gone extremely well. We've tested a number of cell lines that have been specialist cell lines provided by Astra, and we've got some very good results.
So we're moving in the right direction to get this developed ready fit for use. And there are many, many other companies interested in DDR. DDR is a big area of development. We can use the same assay or similar assays for those customers. It was extremely encouraging that AstraZeneca signed a second deal with us very shortly after the first one. This is focused on prostate cancer. And again, it's looking at a protein. Remember that proteins cannot be looked at with the alternative analyte, the circulating tumor DNA fragments of dead cells. So this is really the only way to do longitudinal monitoring of antigen receptor is to look at CTCs. They're paying us around GBP 550,000 to develop this assay for them.
We own the assay goes on our menu afterwards. We can offer the same assay to other customers. And AstraZeneca have multiple programs in prostate cancer where this androgen receptor assay is relevant. We've already identified -- we've tested multiple antibodies, and we've selected one for this assay and that is also going extremely well, and we expect to be slated, assuming that continues to go as it is, to be slated for an important trial for AstraZeneca early next year.
Now beyond that, we've got an additional contract for Recursion Pharmaceuticals, which we've announced recently post period end. Recursion $2 billion market cap company, it's, I call it, a large biopharma rather than a large pharma because its revenues are still modest, but it has a large development program and a lot of investment capital NASDAQ listed. And what's very exciting for ANGLE is they have multiple large pharma partnerships in place. So the development of assays for Recursion can feed into these other large pharma will be an entry point for us to that.
They have agreed with us a fully funded pilot study. So we're being paid to test our system in the cancers that they are interested in and that is starting up now. So that's very promising. As an overall picture of how we're developing our pharma, we use 3 words to describe it, which are depth, breadth and halo. Depth means that when we get into a particular project with pharma, we're seeking to progress it all the way through the phases through Phase II, Phase III and all the way to companion diagnostic, and we get ever-increasing revenues associated with it. Breadth means that any one of these large pharmas has multiple other programs that we could get involved in. So we're looking to cross-sell. We're talking to them about many other ways that we can help them. And we've already identified numerous such opportunities within our existing customer base. And halo. Halo is really beginning to have an effect now. Halo means that now that people can see, we've already got contracts with other large pharma, particularly AstraZeneca, which is a very, very high profile. The other new potential large pharma contracts -- customers are excited by that and start talking to us whereas perhaps they weren't engaging with us. So we're seeing a very, very exciting build-out of our large pharma pipeline, and we're seeking to develop multiple shots on goal, ideally as many as 20 individual opportunities.
We've got some other biopharma companies that I mentioned. These customer relationships are progressing. And as I mentioned, they also have helped us. So the Artios assay that we developed, paid for by them is the one that we're using for the first AstraZeneca contract. So that's very, very good.
In terms of the breakthrough DNA results that we announced at the -- pretty much the beginning of January. We've been working on that for a bit. We've continued to work on multiple DNA alternative approaches. And we've come to the conclusion that the new probe assay, the DNA kit offered by them which covers 6,500 DNA mutations of oncological clinical interest from 61 clinical relevant genes. That is the best DNA kit available for assessing the samples that we have. So we've engaged with them, and we have signed an option which enables us at our discretion to execute an exclusive license with them worldwide with the exception of China, so that we will own and control this kit.
The kit is going to be used immediately in our pharma business. So we're talking to pharma right now about dual analysis of DNA for ctDNA and CTCs with the aim of using this kit and we also, in due course, because the manufacturing site is moving to a larger manufacturing site, ISO 13485. We will be testing the performance of a variety of batches from that new manufacturer. And once we're happy, we have the right to own brand that kit and sell it as a product.
And now this works on Illumina's next-gen sequencing. So Illumina is the market leader in NGS. And anybody who's bought Illumina NGS, if they bought these kits, they could be running the dual analysis that ANGLE offers. The critical point is it opens up a very large pharma market. The pharma needs DNA testing. They now realize from the data that we and others have presented that looking at ctDNA only provides a partial picture and critically, it misses some key mutations, which are associated with the actual cancer progression. And so pharma is increasingly becoming aware of this and thinking, well, actually, we do need to look at CTC DNA. We didn't know that was possible, but now it is with ANGLE.
I mentioned the announcement today about the 100th peer-reviewed publication. And I can remember trying to get the first publication, and it took us 2 years. So it is actually very challenging to get a peer review publication accepted from a prestigious scientific journal. So I'm very proud of the team and the work that's been done that we've achieved 100 such peer-reviewed publications. And I believe this demonstrates beyond all possible doubt that not only does a Parsortix system work in recovering circulating tumor cells, but that it has very high value and clinical potential.
And this has been essentially endorsed by these 100 peer-reviewed publications all of which are positive about potential uses of Parsortix. And they have been authored by 42 different leading independent cancer centers. So it's not just ANGLE. This is 42 leading cancer research centers around the world who have published. And not only that, it covers over 24 different cancer types. So we've been primarily focused on breast cancer, prostate cancer, ovarian cancer and lung cancer. It's the 4 that ANGLE has been particularly pushing on, but there are 20 other cancer types and the system works without modification.
And just to reiterate, this body of evidence is critically important. When we talk to pharma, they don't talk about how much they like you. They ask questions about what data do you have to prove whatever it is that you want to claim. So this is part of our data as well as our internal data. So now I've got the last slide coming up, and then I will take questions from the room together with Ian.
So we have actually achieved a tremendous amount in the first half and we've had multiple key developments and milestones, which are expected to come through now. We're getting very good progress on the 3 large pharma contracts that we already have in place with major revenue potential, and we're expecting them to progress through the key stages of development to give us more substantial project revenues. We've got multiple cross-sell opportunities with the existing large pharma customers, and we expect to see new projects being announced and we've got multiple additional large pharma customers that we expect to onboard as well as we've got some very good discussions going with some large corporates who have downstream diagnostic capability that could be married up with Parsortix.
And that aligning ourselves with large pharma and large corporate is, I think, the best way to progress our business model to do it in conjunction with these major players. The molecular assay for the dual analysis for CTCs and ctDNA from a single blood sample is expected to be launched within 6 months and will be a major sales driver for the business going forward, we believe.
Now I said that we were prioritizing our investment on the large pharma strategy. And we believe that doing this and also cutting costs in the products area, is the right thing to do whilst the current market conditions in the product side are challenged. We expect those conditions to improve. And obviously, we will then potentially expand the product side again. But at the moment, we will keep it going with the research use but not put as much discretionary investment, and we will cut some of the costs. The new plan for prioritizing the large pharma is anticipated to drive cash flow positive trading in the second half of 2026. It will deliver a stronger and more profitable angle for the future.
Now just as an aside, I am a keen open water swimmer. And I know that you can travel much faster in the flow of the current even if the distance is a little bit longer. Products at the moment is somewhat slower flowing water. On the other hand, our large pharma strategy is very fast flowing water, and you can feel it. And I'm convinced that our new plan, prioritizing investment in large pharma will deliver transformational growth for the business, and we will be stronger, more profitable with a lower cost base with the potential for numerous shots on goal with very large revenue potential and crucially, with development fully funded by the large pharma. Thank you very much. I'll take questions now.
Philippa Gardner from Trinity Delta.
I just wanted to ask a couple of questions, if I could, please, about some of your current pharma services contracts. So on the 2 deals that you have with AstraZeneca, the financial terms of those are quite different. Is that because the first -- the DDR is for a product that you -- an existing asset that you had and the second is for assay development? So if you could just explain why those terms are so different.
My second question on Recursion. I know there are very few details, but given a pilot study is about to start, does that mean that it's not assay development, but rather using something that you have existing already? And then just the third question in terms of the Products business. Does that mean that you're scaling back on your sales force in that arena? Are you sort of pulling back on your global distributors? Just some idea of what's actually happening there, please?
Thank you. Good set of questions. So the AstraZeneca development contracts, you're exactly right. So the DDR assay, we've already developed it and what they wanted to do is to just refine it slightly and add a bit. So isn't really that much work.
The second one, androgen receptor, we didn't have anything on androgen receptor. So we started that from scratch. So obviously, we've got the basis of getting the cells down to slide, and we know how to do it, but we have to find the right antibody and optimize it. So that's why I'm very pleased that that's looking good. The Recursion, correct. We're not doing any new development for them. We are deploying the assets that we've already got, so that they can look and see the relevance for what they're doing.
They're quite an interesting company actually. They're using artificial intelligence for drug discovery, and it's an interesting new way of doing things. And as I mentioned, they've got good contacts with their large pharma partners themselves. In terms of the structuring, we will be cutting some costs out of the business on the product side. Actually, the sales team have got capabilities which can be very useful in other parts as well. So large pharma and the large corporate sales.
In terms of the distributors, the good thing about distributors is that they pick up the cost. So we absolutely happy to continue to sell via the distributors. They get 30%. And is their boots on the ground, not us. So it's more about us constraining our costs and investment. But third-party distributors, we're happy for them to go ahead.
Yes. And that's certainly the case with some of the distributors. There's some very good performers and some weak ones. So we also have to focus on those distributors to make the most of the ones are doing well and consider what we're doing with the ones that are performing more weakly.
It's [ Ed Chan ] from [ Sing Capital Markets ]. Two questions, if I may. So I think the first question is more about the sort of pivot to this focus on the large pharma strategy. Probably quite a similar question to what was just asked.
But from the sort of large pharma size, is the business rightsized in terms of how you want to scale that large pharma business? So for example, you've got currently 3 contracts. But with your scale up in revenues or expected scale up, do you need to further invest in the business? Or do you think you have suitable resources at the moment to kind of just invest as you grow?
Yes. So I'll start off on that. So if you look at the pharma side of the business, there's 2 core services that are provided. One is assay development, the other is clinical trial support. So the assay development, that does require R&D resources to deliver that in particular.
But we recycle those as we go through, so they can work on one particular project, then we move on to the next one. Now depending on the number of projects, we may need to expand resources over and above what we've got. But at the moment, we've got resources working in multiple areas. And as I said, we can recycle them over time, but also prioritize them dependent on the workload that's required.
In terms of the clinical trial support, that's processing of samples, and that's delivered via our clinical lab, and that's a separate resource structure for the R&D lab because they need to be separated for regulatory purposes that. In terms of the clinical lab, so we've got ample capacity in our facilities in terms of what is arguably the main limitation, which is the number of [indiscernible] you need to process samples. But -- so we've got ample capacities there to deal with to the next 5 years on our forecast.
Where there's a bit of rightsizing at the moment is we've got a smaller team because we're at an earlier stage in terms of the number of projects we have. As those project numbers go up, then yes, would need to add in some resources, but we're also investing if you look at some resource-intensive areas on the imaging side of the business. We're also taking work around using artificial intelligence in automating some of the imaging so with less time resources, but there's the cost feed through.
And obviously, if it's all on the back of sold work to pharma, then we've got those extra contributions from cost of sales that we can recycle into expanding those teams without -- in a positive way. So we can certainly see that, that's not -- it's not going to be a constraint, but we do need to rightsize the business for the work that's on the books. And there is a lead time on that as well.
That's right. And then just one more question on the NuProbe option agreement because you're obviously saying that potential launch is within the sort of next 6 months. In terms of the sort of -- are there any shared economics between the 2 of you or NuProbe and yourself?
We've agreed a price for the kits that we'll buy them from NuProbe and that's a pretty good keen price. So there's a tremendous amount of margin potential for us. And it's probably worth noting because I don't think I covered it in the presentation, but we have not had to pay any large upfronts and we won't be doing anything like that.
The reason is because we're pretty much one of a kind in terms of a company that can exploit this technology that they've developed originally for cTDNA in CTCs. So they're very happy that we're running with it.
Adam McArthur from Cavendish. So Andrew, I think you spoke about it at the start of your presentation about the effort that goes into winning these large pharma contracts in terms of sort of that sort of time lines from that initial content that you make with a potential customer to actually signing on the dotted line, how much effort is that?
Can you get in terms of sort of the actual length of time to actually to get there? I think the second question is on the contracts themselves. Do you have any sort of small milestones as you go through some of those stage gates Phase I to sort of Phase II, Phase III attached to those or any sort of small royalties in any approved drugs attached to those contracts?
And then the third one, again, just on Recursion, obviously, we've gone through a merger of Exscienti. One would imagine there'll be a bit of a strategic review at some point? Would that potentially impact your contracts and arrangements that you have with Recursion currently? And are you confident that those sort of -- those contracts and the collaboration you have with them is more long standing?
So the first question was about the amount of effort to secure a large pharma customer. So we saw, for example, with Astra that it took pretty much a year and it's not so much that it's costing us money during that time, although obviously, we were allocating some management time to progress in the relationship.
It's just the elapsed time and we have to provide a lot of data to them. There are lots of different people involved. And we eventually got to a point where they were then wanting to know about our ethics permission for whether we could handle samples and about our quality control system and the credentials of our staff, et cetera. So there's lots of different things. And with that particular one, with the first one, the DDR one, at the last minute, they said we want to contract this via scientist.com, which is an intermediary between pharma and pharma suppliers, which is okay, but it meant that we then had to go through a further accreditation process with scientist.com.
So the process took a long time, which is why it was tremendous that the second one was done within a few weeks because we'd already now passed all of their requirements. And what we generally do is we also seek to set up a master agreement, master services agreement, then we can add things to that and it makes life a lot quicker not easier. So the first one with a new large pharma customer challenging, later ones, much quicker.
And the scientist.com has got a twist to it as well because there are several -- there are multiple other large pharmas that use scientist.com. So we're seeking to market via scientist.com into some of them as well. So that was the first one. In terms of the contracts that we've got with the 3 contracts that we got, they have got individual sort of agreed work stages and work packages. And we're actually running a bit quicker than we budgeted on the big one, the androgen receptor one. And the other 2 are on track. The Eisai one is not a development. That is running 50 patient samples at 2 time points.
And that's also progressing. So we've got -- we've been able to show that for most, but not all of the patients we can get circulating tumor cells out and that we can assess those circulating tumor cells for HER2 status. We are blinded to the clinical data, so we don't -- we're not able to say that we've got a clinical correlation at the moment. But obviously, at a certain point, that will be unblinded and I'll assess how good the assay is at predicting response.
And what I'd add to that, so we're not at the stage of royalties, tight discussions with it. This is pure fees paid for work. And in the very early stage work, we're doing that as kind of more of a joint development type work. And we keep the ownership of the IP on that, which means we can add that assay as part of our content building. It's part of our menu building so that we can offer that to other companies, that's why we do that sharing of that economics. But as we move through the stages, then we move to more standardized pricing and that very significantly dependent on what the particular downstream assay is. So if it's NGS, that's going to be more expensive than PCR-type assays. So there's a mix of pricing all dependent on what the customer needs.
And the one we haven't covered yet. You asked about Recursion. So Recursion does not involve us in developing an assay. Instead, what we're doing is we will be testing various samples that they're providing to us. We'll provide the information back. And it's essentially a methodology whereby they can assess whether they think Parsortix CTCs will be useful for the work that they're doing and then there'll be a review of that.
And hopefully, they will then say, well, actually, we can see a deployment of this in ABC area. But obviously, that's uncertain at the moment.
That looks like that's the final question. Thank you very much for your attention, and I appreciate the support of our loyal shareholder base.