LBT Innovations Limited (ASX:LBT) Managing Director and CEO Brent Barnes presents on progress with the company's microbiology culture plate reading device APAS Independence, which uses artificial intelligence to read and interpret plates, additional analysis module development, sales pipeline and strategy, at FNN's Investor Event.We have quite a relevant story, I think. We just said from March and hearing about the COVID-19 crisis. When you think about LBT and the product that we have, we have the technology where our customer are these pathology labs doing all this testing. While our test or our automation doesn't provide the COVID-19 testing, it's really, really relevant because coming out the other side of this, these labs and our customers are really going to be inundated with the backlog of testing that's going to come out the other side. Really, solutions such as automation to provide those efficiencies to laboratories in the labs is a really compelling value proposition, and one that we're really excited as we move through this crisis point.
The normal disclaimers are applicable. We're a listed company on the Australian Securities Exchange. I'm going to talk about our market opportunity, go through the value proposition and then finally look at some of the outlook. We're at a really great position right now. We have some very much compelling milestones that we expect are still on track in the near term. We've been working on these some of them for some years and we expect this to be a really important year for us in our tenure. This is our technology. We call it the Automated Plate Assessment System, and effectively what it does is it automates the reading of Petri dishes. The best practical example that I can give you is that if you think you have a urinary tract infection, the urine specimen is taken, and it's sent to one of these busy laboratories all around the world.
The first part of that workflow is putting it onto a Petri dish or an agar plate. It's incubated for a number of hours, and following incubation you have a scientist sitting at a workbench, manually doing a culture plate read. That's where we saw an opportunity to provide automation in an area that is very, very manual. What we've done is that we've trained an algorithm using a machine learning platform, and we've trained it to interpret that plate pixel by pixel. Importantly, we make a clinical diagnosis. We diagnose those plates with no significant growth, and they are removed from the workflow automatically. It doesn't require a scientist to see or have to deal or manage with that negative plate. When you think anywhere up to 85 per cent of those plates are negative, we're removing the majority of the workflow.
I think, importantly, is that we've been at it for some time, about 10 years, we've gone through all of the risk areas that one may expect when they're learning about these new novel technologies, and we've done the clinical trials, we've been able to get the regulatory clearances. We got patent protection, including on the algorithm with respect to the overall product portfolio. We have a product now that we're in the early stages of commercialising globally.
This picture is a really good one. It gives you an idea of what a Petri dish looks like. That's the image on the left hand side, and on the right hand side, it's very typical of a microbiologist sitting at a workbench manually reading these plates. That just gives you a visual idea of what happens in all labs, all around the world. There is no other technology that automates Petri dishes. When you think about the size of this market, we've got there 2.4 billion plates per annum being reviewed. That's something that we see single digit growth. It's not going away, and particularly it's just ripe for automation. Next slide, please.
Some of the data points around the profession and the industry that we're in and where we're looking to provide automation is this critical resource of a microbiologist. There's not enough microbiologists coming through the university systems. We don't have enough of them. A really important stat on this page is the one which is looking at the US market, where at any one time, 9 per cent of microbiology jobs are vacant. When we look at what we've tried to provide with respect to automation or what we're trying to do, we're not trying to eliminate a profession of microbiologists. We still need them. What we're saying is let's put in a piece of equipment which automates really that manual reading, that activity that still requires some skill absolutely. There are far more valuable activities that a microbiologist could be doing it in a lab. That's what we're looking to repurpose. Next slide.
When we look at the market opportunity, it's a large market. The way that we've segmented the market really is taking a customer-centric view first. We've tried to look at those labs that we believe will be able to get a payback on their investment within that two- to three-year time horizon. When you look at that market opportunity of 13,000 labs, majority of those are in those medium labs. What we're seeing, particularly in those areas where it's particularly hard to get those microbiologist resources, is those smaller labs, looking for APAS as a solution to address their needs. Next slide.
We're being really targeted and focused on our launch. We're not going everywhere at once. We're launching in four markets. We launched here in Australia first. It's a small market, but we know it well. It's obviously very easy for us to get around, and it's a market we've been in for about 14 years. We understand the customer base and we understand the demographics here. The other markets are the US, the UK and Germany. Clearly, the US is the single largest market globally. Importantly there, when you look at those four countries and consider the addressable market for us, there's about 2,000 labs. Going from that macro number that I mentioned of 13,000 labs globally, let's be really sharp on our focus. We have a very compelling prospect there with an addressable market of 2,000 labs or thereabouts that we expect qualify, or would be very interested, with an APAS Independence instrument. Really over the last 18 months, we've focused a lot of our effort on getting into these markets, getting the regulatory clearances that are required -- in the US, as an example, getting our Class II, 510(k) cleared. We did that last year.
We have an instrument that's available for sale in the US. We've seen CE marked the instruments, so it's obviously available for sale in Europe and it's listed on the TGA for Australia. What we've done is importantly set up some key opinion leader reference sites in each of these countries. These are advocates of the technology. These are labs who have purchased an instrument in some cases. St Vincent's Hospital in Melbourne have purchased an instrument, Labor Wisplinghoff in Cologne, Germany have purchased an instrument. But importantly, not only are they doing that, they're strong advocates of the technology. They've published and presented at conferences all around the world over the last 12 to 18 months. What's more important is that they're welcoming to other potential customers to come and view the instrument in situ running in their laboratory. You get that real life experience, which is really important. Next slide.
This is the product mentioned before. Really, the core of this product is what we call the analysis module. This is the software, the algorithm that does the interpretation, pixel by pixel on the plate. Looks at the colonies that exists, is able to distinguish between the various morphologies, do enumeration or a colony count, and is able to make this clinical diagnosis that I spoke about. Really importantly, is that it's proven. This isn't a technology that's still under development, that has question marks about whether it's as accurate as a microbiologist or not. We've done a 10,000 global clinical trial to demonstrate the accuracy. It was that trial that formed the basis of our de novo application to the US FDA, where we've subsequently received FDA clearance.
I want to restate -- there is no other technology that automates culture plate reading. The predicate, or our competition if you like, is with scientists, with the manual culture plate read. For these labs, it's three times faster than what a manual culture plate read is, and so provides efficiency, relieves these microbiologists who remember, are in short supply, to do more value-added activities within the lab. Next slide.
I spoke about the competitive landscape, and really we compete directly from a capability perspective against humans, so against other microbiologists doing plate reads. There are two other competitors that provide this large end-to-end automation. They provide the automated inoculation and streaking, and it goes through a track and goes into an incubator, and they have some camera technology, but rather than a microbiologist sitting at a workstation manually touching the plates, they review it through a computer screen. These end-to-end instruments provide more mechanical movement of the plate through a process, but they still require a scientist to do the reading and the interpretation. It's just done on a computer screen. There are high capex items. They really focused on only those very, very large labs who can warrant both the space -- the physical space associated with those instruments -- and the capex costs, starting at $2.5 million US dollars. Next slide.
On that workflow, this is where we saw a real unmet need. Where we said, "Look, most labs aren't going to be able to afford that end-to-end automation. Automating all of those boxes down the bottom there. Let's look to automate the particular part of the workflow that you require a scientist to do. You can train a technician to put the specimen on the plate and to streak it and then move it into an incubator, but you need to have a microbiologist to perform the plate read, and that's tied into the reimbursement system." What we're able to do is we're able to provide a modular approach to automation and really that means for our customers, it's a larger market opportunity. It's much more affordable than the alternatives, and puts us in a really niche space. Next slide.
As I mentioned, the analysis module is the core part of the instrument. This is the thing that does the interpretation of what's on the agar plate. What we're doing is that we're developing a number of analysis modules. The US de novo clinical trial was for urine specimens. Most of these are specimens going through the culture plate workflow. Urine, that's where we started. We've got a urine module that's FDA-cleared. We've submitted our 510(k) for the next module, which is called MRSA. We submitted that in March and expect FDA clearance in the near term, in the next couple of months. MRSA is the routine staph identification. The point of this slide is saying that we have a pipeline of analysis modules that we have established that are available or in the process of becoming available. What that means is that we actually see the market size opening or becoming larger than what it is today. Next slide.
This slide talks about that roadmap. We've got the urine module in the US. We expect the MRSA to be FDA-cleared. July timeframe. The next couple of months. We've already submitted that application in March. We have a portfolio of analysis modules that we're working on that only increase the clinical utility of the instrument, which, as I said before, gives the opportunity to increase the market size. Next slide.
We've been at it for 10 years. It is a machine-learning algorithm. We started developing this before everyone was doing AI, and it was a buzzword. It is unique and proprietary to what we do, and that's really, really important. When you look at the investment value relative to where we've come from -- we're at 2020 and we started this back in 2010 -- we've really de-risked a lot of those really important milestones. We've got the regulatory clearances. We've been successfully able to establish key opinion leader reference sites in each of these core geographic locations that are really large for us. We've done some of that early work around generating leads through our US call centre. We've got a US person, US sales or business development person, based in California who is doing some of that early work. We've got a European sales person based in Germany doing that work there.
We've got a very nimble sales force with the goal of ultimately appointing a sales and marketing or distribution agent. That will really provide the catalyst for us to start scaling the business. That's what we can expect here in 2020.
A distributor appointment is something that the company has been working on for some years. We expect that even in light of this COVID-19 situation, we are very confident that in the near term, we'll look to appoint a sales and marketing or distribution partner. When you think about it, in a lot of ways, while our customers are very busy with the COVID-19 testing, and they're very difficult to get into with the restrictions on travel, it's a perfect opportunity to establish some of these key strategic relationships to do all of the sales and marketing training while the sales force of this particular distribution partner is not able to effectively get into some of the labs. We're at a really great position in a lot of respects in terms of scaling up and setting this framework for generating real bandwidth from a selling perspective. Next slide.
This talks about the mechanics of how the sales work. The end user price of the instrument, the physical kit, is US$300,000. And then there's an annual software licence. Remember the software licence for the analysis module is the thing that does all the interpretation. You can't opt in or opt out of this license. It's built in to how the instrument work. You've got an upfront capex, then you've got a reocurring revenue component. The consumable is the software licence, and that's in a range of US$20,000 to $40,000. The reason there's a range there is because it depends on the number of analysis modules that the customer is using. The more that they're using, the more money they're going to pay with respect to that annual software licence fee.
And the way that we're selling these is through either a five-year or a seven-year contract. Labs don't purchase equipment like this looking at it just for a one- to two-year time horizon. They look at it from a five- to seven-year value proposition. That's where that payback is really important. Remember that payback's in year two or year three, and so when you look at where the revenue opportunity associated with every sale is in that US$450,000 over that five year time period. Knowing that the useful life, the way that we've designed it, is really more of a seven-year useful life.
Look, the market penetration is really there as an example. We're not putting forward forward-looking forecast from a sales perspective, but if you look at just those four countries, the UK, Germany, Australia and the US and the addressable market, which we identified as 2,000 labs, and then you apply a market penetration of 20 per cent, it gives you an idea of the quantum of revenue opportunity for the instrument, and then the ongoing, the per annum annuity associated with the analysis modules. Next slide, please.
Let's look at some case studies. While that's all well and good, we thought it would be important to benchmark, "Well, what are some other products that have existed in this space that we could give some direction around that install base over time?" I'll actually start with the bottom one, the Previ Isola. This was LBT's founding products. It automated the inoculation and streaking, so putting a specimen onto a plate and streaking it. That front-end part of the workflow. We licensed that to bioMérieux, a large French diagnostic company, exclusively, and they sold it for us on that exclusive basis for nearly six years. And were able to sell around 500 units or thereabouts. So that gives one benchmark. The other one is the MALDI-TOF. There's two companies who do that. They were outside of the US for about eight years, and then they were able to get US FDA clearance, and they saw a real hockey stick in terms of their ability to sell and penetrate the market.
Looking at that over a 10-year time horizon, it just gives you some numbers or gives you some ideas of anywhere from 500 units to 1,500 units over that 5- to 10-year time horizon. It's meaningful revenue with respect to the opportunity that presents itself in the value proposition, but where we're at from an APAS sales perspective, acknowledging we're in that early commercialisation phase and we expect to appoint a global distribution partner, which provides the brand and the scale in the near term. That's a real catalyst and an important catalyst for us to get anywhere close to those numbers in the hundreds. As you can see by the case studies, certainly something that's not unachievable based on a track record of some examples. Next slide.
When you look at what LBT is poised and positioned, what we've done is we've insourced some core capability in the areas of artificial intelligence, science and software engineering. That's core to what we do really well, and we understand that. That coupled, of course, by the quality regulatory, the clinical trial components that are needed to get a product into the market. And that has other applications outside of the space that we're operating in. When we're considering the 3- to 5-year value proposition of LBT, in the short term we're 100 per cent focused on continuing the development of our analysis modules, which have other applications within environmental controls. Water and dairy, as an example, that's an extension and a new market opportunity that exists for us. But there are other applications where we have unique capability that we're looking at from a strategic growth perspective. Next slide.
We have an experienced leadership on board. For those hearing this story for the first time, I've been with the company for coming up to four years, and I took over from the founder and the originator. I'm the second Managing Director and CEO of the company. Before that, I spent 11 years with Cochlear, which most people recognise as the global leader in implantable hearing solutions. Spent time overseas, both in the US living there as well as up in Asia. A broad kind of a tenure with varied experience from quite a large organisation. When you look at the competency of our Non-Executive Directors, we have Kate, our chairman, who's been around really since inception, a great long tenure from the chair. And then we've got some board rejuvenation that's occurred over the recent years, and have some US Non-Executive directors, which is really important considering the size of that market and the landscape that exists over there. A diverse set of skills, which really complement the governance and the growth profile that the company has. Next slide.
From a corporate overview perspective, this gives you an idea of the graph. We announced our 4C recently with $6.8 million in the bank last week. We disclosed that we were able to renegotiate with the South Australian government for a loan facility that we have for $1.5 million at a very low interest rate, pretty well at government interest rate. That's been extended. And we expect in the near term that we'll have an ability to draw down off that. That's a really great non-dilutionary access to capital. That's $1.5 million there as another inflow. We expect around $1 million to the R&D tax incentive later on in the year. Another inflow that comes in. And we've been burning around $1.5 million per quarter.
As part of the 4C announcement, we did outline we're managing our costs, similar to many companies during the uncertain time with COVID-19. We've looked to reduce our cost base by about 20 per cent, but importantly, we've done that in a way that we're not jeopardising the operational momentum of the business, and we're still really at full capacity, working through our analysis module development and ensuring we're using this time as an opportunity to make those changes and to develop the modules that we said we would. Next slide, thanks.
In wrapping up, we have a really a great value proposition right now, I believe, from an investment perspective. We've done all of the heavy lifting and taken out all of the risk from the business. When you consider a technology risk, when you consider a regulatory risk, we've already got those clearances. We've done the clinical trials. We know that the technology works. We've got key opinion leaders that we've established in global sites, and not just Australia. We're really poised as we look at the remainder of this year to establish that foundation where we see the catalyst for future growth from a sales perspective, being that appointment of the sales and marketing or the distribution arm, and with that brings reputational benefits as well as scale. I think that's really important.
We don't plan on building out a sales and marketing and service global organisation. We're a single-product company, and so the appointment of a strategic partner that has a product that's complementary to their existing portfolio is one that we've been working on, like I said, for some time -- in fact, some years. We believe in the near term, certainly we've said publicly, definitely in this calendar year and I say near term, that this is on the horizon. This will be a great catalyst. It will be a really positive opportunity for the company to work with establishing the sales and marketing and business plan, so that when these markets open up due to COVID-19, we have a really attractive value proposition. We've done all of the groundwork ahead of time, and we'll be ready to go. With that -- we're at the 25-minute mark -- I'll leave it there. Thank you.
Ends
