IDT AUSTRALIA LIMITED (IDT) - Transforming Pharmaceutical Innovation: CEO Paul McDonald on mRNA Advancements, Strategic Market Growth, and Future Potential in Advanced Therapies

Paul McDonald, the dynamic CEO of IDT Australia Limited, shares the game-changing strategies that have skyrocketed the company’s revenue by over 1,700% in the advanced therapies sector. Discover how IDT's transformative approach, initiated just two and a half years ago, has harnessed existing products and introduced groundbreaking innovations like mRNA and complex lipid nanoparticles. Paul dives into the future of antibody drug conjugates, offering a targeted approach to chemotherapy that minimizes side effects, and reveals how strategic pivots into advanced therapies have revolutionized IDT's market potential.

Get an insider's look at how IDT's newly secured $20 million asset-backed loan facility from ScotPac is paving the way for future growth. Paul outlines the strategic deployment of this capital to seize new opportunities and invest in state-of-the-art technology. Learn about the company’s calculated steps, from utilizing the R&D expertise brought in from Pfizer to pushing the boundaries of pharmaceutical innovation. This episode is a treasure trove of insights for anyone keen on understanding the intersection of strategic planning and pharmaceutical advancement.

Transcript

Andrew Musgrave Host

00:05

Welcome to another episode of ASX Briefs, and joining me again is Paul McDonald, the CEO of IDT Australia Limited, a leading pharmaceutical manufacturing company based in Victoria and specialises in high-potency pharmaceutical products and advanced drug manufacturing services. Paul, thanks for joining me again and welcome back to the ASX Briefs podcast. 

Paul McDonald Guest

00:26

Thank you, Andrew. It's great to be here today. 

Andrew Musgrave Host

00:29

Now it's been a while since we last spoke. Plenty of activity at the company. So, first of all, IDT has seen significant revenue growth in recent quarters, especially within the advanced therapies segment. So, what has been the key drivers behind this growth and how do you plan to sustain this moving forward? 

Paul McDonald Guest

00:45

Yeah, you're absolutely correct. The advanced therapy has been a standout for the business. But I'll take you back to probably two and a half years ago where we set the current strategy. We set a transformational strategy where the first part, the first horizon, would be to look at all the products that we make, that we have processes for and we have development methodology for, and try and do more of those standard processes to generate greater revenue without a lot of effort into research and learning new techniques. 

Then the second part of that strategy was to do something that's very similar, that only needed a slight adjustment to process, procedure and methodology so that the team didn't have to learn a lot more to increase a whole new set of skews for our manufacturing pipeline. So that was step one and step two, and then the third step was to do something wildly different and create a sandpit and go into an area that the business has not been in over the 50-year history, and that was to generate an advanced therapy platform. Now, with an advanced therapy platform it's very complex formulations, high barrier to entry and obviously, with the level of complexity and limited access from the market, you've got less competition and probably can attract a higher margin as well. So, with a three-horizon strategy, we set about each one of those strategies has worked for us and has generated an uplift in revenue. But now we're seeing the third horizon coming in and really starting to take off. 

Andrew Musgrave Host

02:30

Okay, and the advanced therapies, as you mentioned, has been a standout performer for IDT, with revenue up over 1,700% year on year. So, can you elaborate on the types of advanced therapies you're focusing on and their market potential? 

Paul McDonald Guest

02:43

Yeah, the advanced therapies we're focused on again very complex formulations. I've been able to secure quite a lot of R&D staff that when Pfizer stood down their R&D team over in Melbourne, so a lot of them have come through. So, we're looking at mRNA, or complex lipid nanoparticle formulations. It's effectively an mRNA will not survive through the plasma and make it to a cell, so it needs to be coated in like a drop of oil in order to get there. So that's a very complex nanoparticle formulation that we've perfected here on site. 

To date we've made more than five of those vaccines released to human and the antibody drug conjugate. So, antibody drug conjugate is a new wave of chemo. Well, it's not so new, it's been around 20 years, but development challenges have caused its uptake into the market. So now they've become a lot more robust and it's a chemotherapy that targets the tumour and the key difference here is, if you're targeting the tumour, you're having less off-target side effects. So, the traditional modes of chemotherapy where you're poisoning the body, and you've got a lot of negative side effects because it will damage DNA right through the body. With the targeted tumour technology it'll go to the tumour and the tolerability is higher because there's less side effects, and you can increase the dosing as well. So, these modes are going to be far more effective than traditional modes of chemotherapy. 

Andrew Musgrave Host

04:24

Okay, and the company has recently secured a $20 million asset-backed loan facility with ScotPac. So how will this facility help you support your growth ambitions, and what are the key priorities for deploying this capital? 

Paul McDonald Guest

04:36

Yeah, well, it's more of a. The idea is not to employ the capital unless we see an opportunity which is going to be one plus one equals three sort of event. So, we have that now to be able to access capital to employ some of the opportunities that we might see and move forward. There's a small capex required. We have the facility sunk costs, building facilities. There's probably a small capex to chase a new opportunity and fit out that with the latest equipment and move forward. But we won't be accessing that capital unless the opportunity has a short return on investment, and we see that it's going to grow the top line substantially. 

Andrew Musgrave Host

05:23

Okay, and given the rising interest from US-based clients, how does the company plan to further expand its geographical footprint and service offerings? 

Paul McDonald Guest

05:32

Yeah, we see a lot of interest in the US. So, there is a set of conditions for clinical trials in Australia which are very favourable to companies like IDT. So, where we want to work on translating a new novel medicine, potentially targeting an unmet medical need, you bring it into Australia. We've got R&D tax credits that are supportive of the biotech. We have one of the fastest approval processes for first in human clinical trials, which is far faster than our peer countries. So, a lot of biotech’s will come to Australia for that. We're also very IP friendly so the IP that comes in has less probability of leakage and devaluing the biotech. So, there are a set of circumstances there that drive those companies into Australia. 

So, we're out looking particularly in the US to try and bring those biotech’s in. We know that they're coming in to do first in human, so we want to track them to do their manufacturing at IDT. And secondly, we're seeing a lot more interest now out of Japan and Korea. So, we're also targeting those nations. They see Australia as a high quality so we're targeting conferences and connections and networks in Korea and Japan as well to bring them through the same channel. Now the reason we go in the early-stage phase one is because the asset will continue to grow as it moves through phase two, phase three and into commercial. So, once we've got an asset in there that looks like it's going to work and treat an unmet medical need, then it will continue to grow over the years to come. 

Andrew Musgrave Host

07:20

Okay, and looking at things at a more macro level, the pharmaceutical industry is evolving rapidly, so how does IDT navigate the competitive landscape and differentiate itself from its peers? 

Paul McDonald Guest

07:30

Yeah, that's a great question, Andrew. Every pharmaceutical company or contract manufacturer will have a different strategy and a different line. But I think there's one thing that really stands out with IDT and we synthesize and manufacture the starting material, as in an active pharmaceutical ingredient API. We also do formulation, development formulation, filling in sterile, complex sterile files and we also do tablet capsule. So, we and liquid oral as well. So, we've got the ability to do more parts of the supply chain that probably some of our competitors. So, this is how we're trying to differentiate we'll take on a client with a new molecule, we'll design it, we'll synthesize it. We'll then formulate it, put it into the finished dose package label and ship to the clinical site or even ship overseas for commercial distribution. So having more parts of the supply chain and creating a sort of one-stop shop. And you can't underestimate how important the development, the R&D part is from the CDMO and also regulatory knowledge on bringing that product through their milestones. So that's really the advantage that we're trying to set up as a one-stop shop. 

Andrew Musgrave Host

08:53

And with the recent focus on medical cannabis and specialty oral products, how do you balance scaling this segment while focusing on the high-growth advanced therapies business? 

Paul McDonald Guest

09:03

Yeah, what we've tried to do is build up teams. So, I've got experts in specialty oral manufacturing formulation and development, and I've got experts in parenteral, complex, sterile formulations. So, they're mostly segregated and focus on their own programs. But we have specialty experts for those programs. So, we see mental health and ageing population leading toward mental health and CNS disorders, central nervous system. So, neuro and central nervous system is a symptom of an ageing population and cancer is also a symptom of an ageing population. Then we have, as we all know, a pandemic response or a respiratory response. So, there's three pillars there that we're working with. They all work relatively independently, cancer, respiratory and viral response, and also ageing population through brain, through to CNS. So, they're actually kept quite independent and all growth vehicles in their own rights. 

Andrew Musgrave Host

10:22

Okay, and just to wrap things up, IDT has a strong pipeline with over $17 million in customer proposals submitted recently. So, what can investors look forward to over the coming quarters? 

Paul McDonald Guest

10:32

Yeah, in the last quarter we actually secured $12.9 million in new deals, so that'll flow through over the next calendar year as they come through. And we also put out $17 million in proposals and we're going to continue to shop and find new clients and bring in new work. So, with $12.9 million in work orders one, in quarter two we expect a continuation of our quarter-on-quarter growth that we've been able to deliver for the last two and a half years. 

Andrew Musgrave Host

11:07

All right. Well, Paul, it's been great to catch up again. Plenty happening at the company and we look forward to further updates in the upcoming months. 

Paul McDonald Guest

11:14

Thank you, Andrew, it's been a pleasure today. 

Andrew Musgrave Host

11:16

That concludes this episode of ASX Briefs. Don't forget to subscribe and we look forward to catching you on our next episode.