The following Q&A comes from the recent DeepMatter Group Plc Half Year Results Webinar
Q1: I have watched my investment in Deepmatter lose considerable money with lack of news, what are your plans to increase shareholder value over the short term
Our focus is on building value for the long term. The business is still at an early investment stage of its development. We made good progress in H1 this year, as laid out in our results statement, and are confident of maintaining that momentum.
Q2: How important is data collection and monetisation of that data to the company?
It is a key aspect of our business strategy, as articulated in our recent results presentation and exemplified through our announced University partnerships (data collection) and contract with the life science business of Merck (monetisation).
Q3: Is there good potential revenue from sales of consumables, once companies are using your physical products?
We are a data company. The hardware we provide is not sold separately from our software platform as an enabler. We don’t have a consumables business model.
Q4: What are your plans about the depressed share price? Why has the company not engaged with Richard Griffiths on his selling?
Our focus is on investing in and growing the business for the long term. As it develops, we are confident that its growth will be reflected in the share price. We are in regular contact with all the major shareholders but do not comment on any particular organisation or shareholder.
Q5: What has happened to the Novartis link up?
We remain engaged with Novartis and anticipate being able to talk about this link-up in due course.
Q6: We have lots of links to large Pharma’s including Byrn Roberts of Roche appointed NED. Why are we not seeing any improvement in the share price of at least expectation of bigger contracts?
Our focus is on investing in and growing the business for the long term. As it develops, we are confident that its growth will be reflected in the share price. It’s not for us to comment on the company’s share price.
Q7: Do you think your are selling your products at the correct price, are they too low? Are you adopting a foot in the door method?
We keep our pricing and sales strategy under careful review, ensuring we balance driving timely adoption, while also ensuring we are not undervalue.
Q8: You don’t seem to be driving the company for shareholder value, total lack of PR and suboptimal pricing, the SP is appauling. How do you plan on addressing these issues ?
See Q6 answer
Q9: When do you see this company in profit? What is your strategy to get there, currently administrative and R&D costs combined with clearly low pricing to customers seems to be a money burning strategy. Is your intention to be bought out?
We are an early stage technology company and it is not unusual for an organisation at this stage to be loss making, as investment is required in both the product and the commercial organisation required to sell and deliver the product with scale. We outlined in the presentation, that we are focused on Sales and Marketing of the products, to defined sectors of our potential market, to deliver the revenue growth.
Q10: Not heard one mention of a strategy for returning value to Share Holders only value to the research community ? Can you please explain your strategy.
We are focused on investing resources to monitise our products and services as a route to creating shareholder value.
Q11: Doesn’t seem to be a sustainable business model to me without significant fundraising in the future
As we develop and invest in the business, we review on a regular basis our funding needs and options.
Q12: Canaccord not available on research tree
Research is available for clients of Canaccord and paid for subscribers of Research Tree.
Q13: If you are the leader where is the revenue from Digital Glassware?
We have secured agreements where we anticipate recognising revenues for DigitalGlassware in the second half of 2021.
Q14: Are you not worried these large pharma’s are not just evaluating DGW to develop their own? Seems they are not paying much for DGW??
Many of our DigitalGlassware® engagements are at the trial stage. It is not unusual for large pharma to enter limited-scope unpaid or paid trials, before migrating to paid full adoption of products. This is typical and anticipated in the Company’s sales cycle planning.
Q15: Share price at a 52-week low, Deepmatter (as opposed to infochem) earned zero revenue for the first time, whilst R&D costs increased hugely compared to the tiny reduction in admin. If you cannot gain traction in the largest Pandemic we have known in our lifetime, is the concept of Deepmatter bust – If not, tell us what it will take to actually make any money from it.
The adoption of digital technologies into the workflows of pharmaceutical companies and CROs is not something that happens overnight. The client based are evidence focused, and adopt products based on strong evidenced based rational. There is now wider acceptance that these sorts of digital technologies are critical to the future of healthcare, and with the evidence base around productivity and discovery gain that DeepMatter has produced with its R&D spend, there is a gain in traction.
Q16: The analyst notes are not easily available for canaccord, (even through research tree) can you place on your website?
Please see answer to Q12
Q17: What are the greatest challenges you are facing when generating revenue and how are you planning to overcome these?
The largest challenge is securing a sufficient evidence base confirming business case. Scientists are evidence focused and while the Company has marketing collateral with this evidence, an “in-house” trial is often required as well.
Sales and budget cycle. Pharma are not fast decision makers and often a trial in one year will not manifest itself in recurring revenues until the following budget year.
Q18: Do you plan on raising cash by selling additional equity within the next year?
See answer to Q 11
Q19: What are the biggest hurdles when selling digital glassware technology, given it is state-of-the-art, why is there not a greater take-up?
See answers to Qs 15 & 17
Q20: What is the current relationship with IP Group PLC, and has this changed within the past few years?
IP Group is currently a significant shareholder. There has been no known change in the Company’s relationship with IP Group. Mark Warne, DeepMatter’s CEO, is a former IP Group employee.
Q21: You’ve talked about developing a contractual pipeline, do you have any figures on this or could you go into more detail?
Our sales pipeline is a mix of new engagements with potential customers and opportunities to grow relationships with existing customers. In all cases, these are at very least qualified leads where the sales team have clarity around what the customer wants following detailed conversations. Our pipeline contains around 40 such opportunities and continues to grow.
Q22: The revenues with these big pharmacies seem very low
We do not engage with pharmacies. Pharmaceutical companies alone are responsible for a significant proportion of revenues in 2020 and H1 2021.
Q23: With fully digtised and automated partnerships, are these pre cursor to building out a longer term strategy around Chemputation and a form of the Chemputer? Is that still on the agenda, given the ecosystem that is being built at present?
Enabling AI driven chemical automation based is part of the longer-term strategy, based on data collected as part of our current data collection strategy.
Q24: Can you elaborate on the ‘47% increase’ in users mentioned?
We have seen a 47% increase in the number of active users of our products H1 2021 vs H1 2020. Our total paid user numbers are in the hundreds.
Q25: The results show DeepMatter disappointingly brought in £0 revenue in H1 2021 as all the revenue was due to InfoChem, how is this possible as your flagship DeepMatter product (Digital Glassware) has been in development for years and what immediate steps are you taking to address this for investors?
See answer to Q12.
Q26: How much revenue has our partnership with Elemental Machines brought in since this was announced in early 2021 and what progress is there with Digital Glassware in the USA?
We have identified several progressing sales opportunities from our engagements with Elemental Machines for DigitalGlassware® in the USA.
Q27: How many trials are currently ongoing?
During H1 we had 8 trials running. We see strong rates of product adoption after trials.
Q28: Who are your main competitors?
Data companies – Database providers, ELN Providers and Life Science Companies
Drug Discovery – Exscientia, Arctoris, In Silico Medicine, Iktos
Q29: Schools and universities are incorporating increasing amounts of digital scientific experiments as part of their laboratory work, for teaching, self-learning and assessment. Is this a sector that Deepmatter is look ing into?
Q30: Can you please explain how you build revenue growth with existing customers both on hardware and data side and how interrelated are these sales?
Customers pay for the products through annual licenses (where revenues are recognised immediately under IFRS accounting) and cloud SaaS (Software as a Service) (where revenues are recognised periodically over a term under IFRS accounting). Deals to exclusively access the Group’s unique data are usually commercially offered on the basis of an up-front access fee and trailing royalties.
Q31: You say you are the leader in this field. But your revenue is very small and revenue growth seems pedestrian for a growth opportunity. What do you believe the total market size to be and what are the items holding back an acceleration in adoption?
DMTR TAM is approximately $1-2bn. Globally, more than $180 bn is spent annually in pharmaceutical R&D with trend growth of c.3% annually.
Q32: Given your H1 loss and cash position, what is your funding strategy?
See answer to Q11
Q33: For a given customer e.g. Merck – what are the key catalysts to enable such an engagement to expand.
Without pointing to any specific customer, please answer to Q17
Q34: Can you elaborate on the share price, the company’s activities and the company’s engagement with shareholders?
We are in regular contact with our largest shareholders and publish all regulatory and appropriate operational news. It’s not for us to comment on the company’s share price.
Q35: Do you see the academic area as an opportunity?
For more information, please contact:
DeepMatter Group plc
T: 0141 548 8156
Mark Warne, Chief Executive Officer
About DeepMatter Group plc
DeepMatter is building and commercialising the most powerful data platforms, to enable scientists to easily perform and optimise chemical reactions, by increasingly integrating chemistry with technology. Ultimately this will allow the greater use of artificial intelligence and reaching a point where chemicals can be autonomously synthesised through robotics.
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