Biocurious: Clever Culture Systems has a lot on its ‘plate' as it revolutionises quality control in drug making

News.com.au

a day ago

Clever Culture's AI-enabled APAS Independence device automates the arduous process of agar plate reading at large drug facilities
Having attracted Astrazeneca as a foundation client, the company is talking to at least 14 more Big Pharma players
The company will expand APAS usage from so-called 'settled' agar plates to 'contact' plates
Reports of big pharmaceutical companies expanding their manufacturing footprint are music to the ears of Clever Culture Systems' (ASX:CC5) CEO Brent Barnes.
That's because the agar plate reading device maker's business is leveraged to Big Pharma's drug making volumes, at ultra-clean 'aseptic' facilities.
'There are many examples of pharmaceutical companies investing hundreds and millions of dollars in greenfield facilities or expanding and modernising existing ones,' he says.
Not surprisingly the activity centres in the US, given Donald Trump's decree of a yet-to-be quantified tariff on offshore drugs.
But much of the activity precedes the Trumpian Era Mark Two. For instance, Novo Nordisk is investing more than US$4 billion on a new facility in Clayton, North Carolina.
The site will produce Novo's obesity and diabetes drugs Wegovy and Ozempic.
'It's a great industry to be in, because potentially there will be a huge shortage of capacity,' Barnes says.
A clean room is a joyful room
Barnes' joy has been sparked by the Adelaide-based Clever Culture's role in ensuring the aseptic facilities are kept cleaner than a rumpus room after a Marie Kondo blitz.
In this case, 'clean' means free of pathogens rather than clutter.
The company's AI-enabled device APAS Independence automatically reads the hundreds of agar plates required to ensure such quality control.
Short for 'Automated Plate Assessment System', APAS can manage 200 plates per hour without a tea break or whingeing.
The facilities need to install and read culture plates as part of mandated environmental monitoring processes.
Now, the microbiologists can focus only on the plates that read positive.
'The plate is clean 99% of the time but if there are bacteria the process can flag a quality event that could halt production,' Barnes say.
'The results are critical in terms of releasing drugs that are safe and effective.'
The US Food and Drug Administration approved APAS Independence in May 2019 and European regulators followed suit in September 2021.
Strategy U-turn gains traction
Formerly known as LBT and then LBT Innovations, Clever Culture focused initially on the clinical microbiology market: hospitals and pathology labs.
But the company discovered that while the tech was proven, these potential clients viewed the device as a 'nice to have' rather than a 'must have'.
Clever Culture turned to the Big Pharma market, attracting Astrazeneca as a cornerstone customer.
Bristol Myers Squibb (BMS) followed suit.
Customers use the units - made in Melbourne by the renowned contract manufacturer by Planet Innovation - in the US, Singapore, China, the UK, Sweden and locally.
'We are focused on the largest pharmaceutical companies,' Barnes says.
'We do that by getting into their 'centre of excellence' facilities – every pharma has one – in the expectation the client will standardise APAS across all its facilities.'
Tests by the plateload
The quality control process involves 90 millimetre 'settled' plates being left open, to absorb any pathogens in the room.
The plates are then sealed and removed every four hours, to be read after a five-day incubation period.
A large facility will produce a steady stream of hundreds of plates.
The rooms also use a second type of agar test – a 'contact' plate about 55-60mm in diameter.
Assistants dab the plate's contents on to surfaces, such as a gown or gloved fingertips. The plates are cultured and read in a similar way to the settled plates.
APAS simply doesn't do false negatives – if a bacterial colony is present, the algo will detect it 100% of the time.
But there's more leeway with false positives. As a result, about 10% of plates are checked by two real-life microbiologists.
Expanding the market
To date, the APAS units have only been able to process the settled plates.
But Clever Culture is tweaking the physical configuration of the units – as well as the algos – to process these smaller plates.
The company aims for a mid-year launch.
Given quality control is split roughly half between settled and contact plates, catering for the latter would seem to double the market for APAS.
It doesn't quite work like that: the contact plate modality is more about enabling clients to automate 100% of their plate reading.
Thus, Clever Culture hopes the device will appeal to smaller customers who otherwise could not justify the cost.
'It's great value add for the customer because they only invest once in the hardware, which can now operate both types of plates,' Barnes says.
Clever Culture is also mulling a cheaper desktop version, APAS Compact, which similarly would expand the market to the smaller facilities.
Revenue model
Clever Culture currently has 13 APAS devices in the field, having launched the units last year.
Astrazeneca accounts for nine of them, having started with one.
BMS started with one site – its centre of excellence – and now has expanded usage to a second facility under a 'sequential rollout'.
Barnes says the company is holding discussions with 14 of the 40 biggest pharma companies.
One of them is completing an expanded 6000 plate evaluation, potentially enabling Clever Culture to hold procurement discussions directly with the manufacturing sites.
More broadly the company cites a 'pipeline' of 40 customers, representing upfront revenue of about $75 million and $15 million of recurring revenue.
The APAS units sells for US$350,000, but Clever Culture then derives ongoing income from an annual software licence of US$30,000 (rising to US$50,000 with the contact plate modality).
There's also an annual hardware maintenance fee of $US15,000-25,000.
In the black
Clever Culture reported $500,000 of net cash inflows in the March (third) quarter, its second successive quarter in the black.
The company recorded receipts of $2.3 million, $2 million attributable to sales to Astrazenca.
The board expects the company to have 'breakeven or better' cashflow in the current half.
Clever Culture ended the quarter with cash of $2.2 million. The company expects to bank $3.6 million of outstanding receivables in the current half.
'We don't need to raise capital to keep the lights on,' Barnes says.
Furthermore, the company has issued in-the-money options, exercisable at 0.8 cents by November this year.
This compares with yesterday's close of 1.8 cents.
If investors exercise all of them - a reasonable assumption - they would generate other $3.2 million.
Clever Culture has earmarked $1 million to pay off a $1 million, low-interest loan from the South Australian Government.
But some of the funds could support developing APAS Compact.
Leveraging a decade's work
'This company has completely turned around over the last 12 months because of its successful launch into pharma,' Barnes says.
Since the then LBT listed in mid 2006, the company has spent at least $60 million developing APAS.
The company's initial misstep into the laboratory sector shows that even if a device is clinically validated, the market needs compelling cost reasons to switch.
'Infectious diseases are not usually life threatening, so a delay in getting a result back or mistake is simply inconvenient,' Barnes says.
'They may pay microbiologists overtime to repeat the test, but there are no real consequences.'
It's a different story for aseptic drug production at a massive scale.
'The consequence of getting it wrong literally is life-threatening,' Barnes says.
'The cost of a product recall and the reputation damage would be in the hundreds of millions.
'In the worst-case scenario, a patient could die.'