Notes on Cellestis AGM 16th November 2009The following are my...

Notes on Cellestis AGM 16th November 2009

The following are my thoughts and notes on CST at the AGM.

“There were about 200 in attendance for the first time a lot of staff were in attendance from Europe, Japan and America. Cellestis has a five day program for all staff arranged straight after the presentation.

Address by Ron Pitcher:

2009 excellent year, substantial difference, which represents hard work, and allows us to provide Dividends.

Hospital and Government sales are less affected by the GFC, it has lowered sales in this market, but strong cash and sales have protected us.

New logistics in the U.S.A. Valencia office stores millions of tests, Germany has a larger facility now. Technical services have expanded, R&D grown and we are using QFT in new product development.

Marketing team have seven staff, responsible for QFT news, digital marketing approach and the second IGRA conference, which culminated in new guidelines. This is the modern testing of T.B. Japan was the last place required for approval which was granted this year.

Looking ahead continued growth and the use of QFT as the default test, new product development represents the future growth of the company.”

Address by Tony Radford:

“Results achieved last financial year are going up substantially, 2009 was a very successful year.

We are focusing on driving marketing business development we encapsulate most of the costs from U.S. and Japan, this forms the largest part of the costs. We will be investing large amounts on this in the future, the only way we are getting there is by more expenditure.

R&D costs have to be directed, cash position is now static, the company intends to give dividends in line with the companies’ profit.

M&A we are a conservative company, we have found no companies that would meet our criteria, kissed a lot of frogs, a M&A company must meet our standards.


Sales and regions: U.S. is our biggest market. Europe, Middle East & Africa next largest, Japan rest of world represents 24%

Events subsequent to 2009
We are 37% better than last year which includes northern summer (usually slower sales).
Japan sales down, why?
When talking about revenues it’s about receipts we have two issues.
1) We have had introductory issues with the third generation product, it basically boils down to the instructions, i.e. a mistake in the wording with one letter which informs the lab to shake over vigorously the tube and the temperature within the lab being to hot, this gives extreme results. We have to change the product and re-launch, this has set us back by five months. Customers who are after third generation tests have to wait until January 2010. Customers have drawn down the second generation tests and this is the situation.
2) Swine Flu non issue here but is an issue in Japan

Moved offices this proved a great time to negotiate a long term lease very favorable terms.

Currency issues: Can’t change the fact that a 95 cents against the U.S. dollar affects our bottom line.

Centre for Disease Control (CDC) issued guidelines for TB in migration to the U.S. is now made compulsory for TST or QFT 500,000 people being tested, most of these people will be BCG vaccinated. Payer is the applicant in person so the cheapest test will be ours.

Marketing and Sales:
Have increased and created regional sales teams, built up in-house marketing. In house medical writer. Distribution and partners program has been ramped up. Significant gains have been achieved in our partner programs.

Meetings:
Done a lot of work spreading the message on IGRA’s lot of data on this. Second conference on IGRA consolidated our position. Now dominant QFT test in the world.

Guidelines:
Vary from country to country. Most significant is the CDC guidelines. First time you have to use QFT in preference when anyone has been BCG vaccinated. Most hospital employees have foreign worker which have been BCG vaccinated.

The jury was out, now over 400 papers later have confirmed it. Now we have to show the market where the answers are. NOWEE assists us with a digital education and resource upgradeable, USB which carries a filter search. Software is available, for technical presentation, materials are constantly updated, customizable. Customers can see our policy warts and all, straight up and down about out T.B. test.

Major reference labs are becoming growing customers, we are working strongly with them, especially getting to small hospitals.

Taiwan we are waiting for registration.

CMV now released, have papers out there, but will be three to five years before we get maximum money back. 70,000 tests = $10 to $12 million per annum, NO competitors.
Growth:
Will come from existing areas. Public health significant. Immigration and guest workers are a big market.

China and India big markets but can’t guarantee because of IP issues.

R&D we need to develop more products, as we have the spread now in the labs.

We are very careful about IP for new products. Our function is to generate products we are not a generic testing company. We have IP protection now out to 2023.”

Address by: Prof Antonio Catanzaro:

“I have been with the company about 10 years, first trip down under to a shareholders meeting. I have assisted with getting the guidelines through CDC and the FDA, have helped with conferences I am a well known repertory teacher 40 years as a lecturer.
30 million people have T.B. 3 million people died last year. Extreme T.B. has sent authorities into a panic. By just breathing the air you can get T.B. There is a well known slogan T.B. anywhere is T.B. everywhere.

Latent T.B.
Target testing: CDC statement in the U.S. now has lowest T.B. prevented 4,000 to 10,000 cases.
T.B. can not be controlled by testing for active T.B., need to control latent T.B. to people who are at risk, QFT does this.
In San Francisco the health department has switched from using the skin test to QFT same budget less cases.
Two Global workshops now helping others to show what they have learnt.
Staff:
Are brilliant people who have been carefully selected.”

Questions:
Q) Money invested in R&D how much profit is made in the future?
A) Whole objective is the long term strategy developed which will create wealth into the future. R&D and marketing will continue we have 3% to 4% of the market. There will be continued growth and paying of dividends.

Q) Low uptake of QFT in Australia. August 2007 NTAC concluded that TST remains the preferred test endorsed by the CDA. I am concerned as a shareholder that the test is not marketed properly here in Australia?
A) Not True. Reimbursements = 40% for QFT. Situation with NTAC is complex.. We weren’t allowed to go to the review of NTAC. NTAC was invited to come to the second IGRA conference they declined. They are behind the times. The statement you are quoting from is from data gathered in 2005. No problem with the test. Does not affect our market in Australia. Here we are doing a wonderful thing can’t get the Australian Government to open there eyes.

Q) Total lack of CST information in the financial press, positive reinforcement would be wonderful, has the financial press been invited?
A) Financial press have not been invited, this is a shareholders meeting.

Q) 3% to 4% market in developed countries how do you know?
A) 18 million tests done in the U.S Europe hard to get the data. Estimate is compared to sales.

Q) Takeover of ARANA went to U.S. Have you looked at such a possibility, have you a strategy to stop this?
A) ARANA is an Australian tragedy I am disappointed that it was sold. Directors in the course of sales and shareholders will act for them. We want this developed as an international company we will always act in the shareholders interest. Cash in the company has caused a significant problem, susceptible to a takeover. Had a look at IP and A&M that will drive the company in a shorter time to greater things.

Q) Any competitors?
A) Elispot requires more labour and expensive, as such represents a research product only. It’s been a bit of a boon for us to. TST is our competitor when we take new market off the skin test.

Q) Cochrane foundation, has any input by Cellestis into this site, this is an extremely valuable foundation?
A) Cochrane process entails a rigorous examination of the data, we have not applied to them directly. It only has value in independence.

Below answers are from Ron Pitcher
Q) Would you ever do a two for one split?
A) No. Doesn’t help our company, and from past experience doesn’t really work.

Q) Would you consider an anchor shareholder ie Thorny investments in Skilled Group as an example?
A) Don’t need the money. From my experience they go where the dollars are and apt to pull out.

Q) What are your thoughts on India and China?
A) This is a big worry because of IP, we will consider teaming up with a proven company with a track record of protecting IP and boosting sales.


I note that only 120,000 options were granted to Prof Antonio Catanzaro