BlueChiip (ASX:BCT) at the Stocks Down Under Semiconductor Conference on 30 November 2021

December 3, 2021

BCT, BlueChiip, MEMS

Summary

BlueChiip MD Andrew McLellan presented at Stocks Down Under’s Semiconductor Conference on 30 November 2021.

See full transcription below!

 

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Transcription

 

Marc: Andrew, welcome. And first of all, let me congratulate you on the announcement today, the certification at the FDA and CE as well, for your cryovials. That’s awesome news.

Andrew: Yeah. Fantastic. Thank you very much, Marc. We’re really excited about it, actually. It’s been a lot of hard work over the last 18 months, especially so.

Marc: Excellent. Yeah, I see your share price is responding quite nicely up 23% this morning. So, that’s good stuff. It’s probably very good timing to be presenting president.

Andrew: Yeah. Thank you very much, Marc. And thank you very much for inviting me, and good morning, everybody.

Marc: Yeah, I’ll leave the floor over to you, Andrew.

Andrew: Fantastic. Thanks very much, Marc. Good morning, everybody. Look, this morning, I just..we put down a deck to the exchange last Thursday, at our AGM. And I’m gonna run through that deck to provide everybody an introduction to BlueChiip Technologies, BlueChiip Limited, a very exciting technology company. Now, this is a semiconductor conference. We’re an adjacent Marcet to semiconductors using silicon. We actually have got a core technology, which is a MEMS device, a micro-electromechanical system. So, I’ll cover that this morning, and provide an introduction.

So, just covering BlueChiip fundamentals, and I’ll get to what our core technology is shortly. And I’ll run a short video as well that provides the sort of environments in the like that gives an overview for the environments in the like that we’re targeting. But just the fundamentals of BlueChiip, we’re a world-first highly differentiated technology. We actually hold 30 granted patents across seven patent families globally. We’ve got three more that are progressing through application phase. We target very highly sophisticated Marcets. That’s IVF Marcetplace, the clinical trial, cell therapies, population biobanking, vaccines that all require ultra-low temperature ID and temperature traceability.

There are well over 300 million high-value bio-samples that are stored and preserved and processed in minus 80 degree or minus 196 degrees C environments. And this is well over 600 million annual target Marcet for us. And there are very large adjacent Marcets. Into these Marcets, the current ID methods are very suboptimal in productivity and quality. We’ve actually done a lot of work in developing our core technology. We’ve got capacity to manufacture 5 million to 10 million chips a year and we’ve got 3 million chips in stock as it stands. And I’ll talk about the next three items here shortly, but we’ve just secured a major partnership with Fujifilm industries, Irvine Scientific in the IVF Marcetplace. And we’ve also just launched just today, Marc, mentioned that we’ve just announced that we’ve gained FDA registration and CE-IVD labeling approval for the European and North American Marcetplace for our own direct-to-Marcet products, which is extremely exciting for us.

We’ve got a lot of cash in the bank. We’re well-covered with 5 million at the end of September or just under, and with about a million due from R&D tax refund. So we’ve got about 6 million essentially in hand, and we’re consuming about one million cash a quarter, which sees us well-placed to really gain traction with the recently launched products.

Key achievements over the last 18 months, I think everybody is well aware that it’s been pretty tough. It’s been very tough in the environment. At BlueChiip, we got really focused on controlling what we can control. We continue to work with some of our OEM partnerships and continue that through. We very happily secured a license and development agreement in the assisted reproductive technologies in the IVF Marcetplace. And we just launched our BlueChiip Enabled solutions, and I’ll cover that in a little bit more detail.

We’ve got ISO9001 accreditation over the last two years. Our software, CFR21, part 11 compliant, CE-IVD and FDA registration. We’ve got scaled supply chains. We’ve just received an international for the year, an international award for one of our product lines. And we’ve just launched a new Marceting campaign with a full product catalogue. So, we’re actually now able to talk directly to end customers and then Marcet. So that’s extremely exciting. And over the last 18 months, we’ve been focused on resolving an OEM partnership, which we resolved. We were in some litigation with a partner, which is now resolved, and we’re moving forward in a very healthy state.

As mentioned, we’ve just launched our overall product. So we’ve got sample storage, we’ve got cryogenic consumables that we sell into the Marcetplace. We’ve got readers, we’ve got hardware, and software that actually we’re putting into the Marcetplace. And we’ve already actually received some orders from customers, both here locally in Australia. We’ve shipped to some customers in Europe, and we’re pushing ahead with a lot of activity in North America.

So what is BlueChiip all about? What I’ll do is I’ll just pull up a video, and run about a five-minute video just to give an overview of what we do, what our core technology is and the sort of environments that we’re actually operating in.

Man 1: BlueChiip Limited is an Australian company with an advanced sample management technology that wirelessly tracks the identification and temperature of valuable samples, which are stored in harsh and aggressive environments, like liquid nitrogen. These include IVF samples like sperm and eggs, blood plasma, cells, and emerging molecular technologies many of which have to be stored and transported in very low temperatures. BlueChiip’s technology is ideal for cryogenic environments, enabling each sample not only to be identified, but its temperature history recorded. For clients, BlueChiip’s technology drives productivity, enhances quality, and delivers confidence in every sample.

Andrew: People would be appalled at how samples are managed in storage today. Identification is typically through a handwritten label or a barcode label, which can fall off. It gets frost on it when people remove samples to identify them. And that then needs to be removed, which can damage the sample or miss identify the sample. BlueChiip’s technology addresses all of these issues.

Man 1: The BlueChiip technology centers on a miniature chip with 52 mechanical beams of different lengths all responding at different frequencies. Each is turned on or off at the point of manufacture to create a unique identification with billions of combinations. Samples can be tracked individually or as large groups. BlueChiip’s technology is protected by 25 granted patents. Headquartered in Melbourne, Australia, BlueChiip listed on the Australian Securities Exchange in 2011. Since then, it has developed further its technology, developing its own products and signing original equipment manufacturing agreements with large companies worldwide to embed the BlueChiip technology in their products. Many more original equipment manufacturers, including several household names, are currently evaluating the suitability of BlueChiip’s technology.

Andrew: To date, BlueChiip has signed three licensed and supply agreements in the IVF Marcetplace, in the research and development for cell therapies Marcet space, and also in the cryogenic consumer Marcet. We also have dozens of developer kits in the Marcetplace with other OEMs, which we would see to convert to products that are BlueChiip-enabled in the Marcetplace in the not too distant future.

Man 1: Another key part of BlueChiip’s strategy is going directly to Marcet with BlueChiip-branded products, especially in North America, which represents almost 40% of the global biobanking Marcet. A direct-to-Marcet strategy enables BlueChiip to customize and package its solutions for clients.

Andrew: Our range from products includes BlueChiip-enabled cryogenic vials. It includes our handheld reader and our range of readers, and our software platforms. This is really important and really exciting for BlueChiip in that it allows our end customers, especially in North America, our primary target Marcet, to gain the full benefits of the BlueChiip solution. BlueChiip is the only company that provides temperature with ID at the sample level. This helps end-users drive productivity, enhance their quality, and at the end of the day, provides them confidence in every sample.

Man 1: Crucially, BlueChiip’s technology works in the harshest of environments like liquid nitrogen.

Andrew: Storage of biological samples, high-value samples in low-temperature liquid nitrogen, minus 196 degrees or minus 80-degree freezes is growing dramatically right across the world. And this is driven by cells being used for therapies. It’s driven by new technologies that are being applied to vaccines and other treatments, and being driven by fundamental research in clinical trials.

Man 1: While tracking biological samples is the company’s current business, other broader applications are on the horizon.

Andrew: There are many applications for BlueChiip Technologies, even just in the life-science space. There are opportunities for cold chain logistics. There are opportunities in reagent temperature management, used in diagnostic applications, and also applications in the emerging technologies used even in the vaccine development that need to be shipped and transported at minus 80 degrees.

Man 1: As the provenance of valuable products becomes increasingly important worldwide, BlueChiip’s technology is increasingly gaining traction across a large number of industries.

Andrew: The future for BlueChiip is exciting. We plan a Marcetplace in cold storage and cold logistics down at ultra-low temperatures, minus 80 degrees and minus 196 liquid nitrogen. These Marcets are growing dramatically. And it’s growing dramatically on new clinical trials, new therapies, cell therapies, and also new molecular technologies that require cold temperature storage, and transport. All of these Marcets are growing hugely and BlueChiip plays directly into them.

Andrew: Okay, I actually like playing the video. I apologize that…I like playing the video because it actually demonstrates the environments which we’re actually targeting. And they’re quite harsh environments, and they’re quite strange as well in the way they operate. The full deck is available. But I’m going to just touch on a number of key slides within the deck.

As mentioned on the video, the major ID and sensing technology sectors that we can operate in involve cold chain logistics, industrial and manufacturing environment, security, and defense. But where we really have a core sweet spot and where we’ve elected to actually focus our strategy is in the life-sciences, cold chains, and that’s logistics storage and monitoring, and very much focused on the storage environments in which that very low-temperature conditions are used, and they’re very large Marcets. These Marcets are actually evolving very rapidly. There’s a drive towards molecular technologies. I think over the last 18 months the minus 80-degree shipping of different things around the world, especially the vaccines, we’re sort of nightly seeing those sort of environments where there are liquid nitrogen tanks, minus 80-degree freezes, those sort of environments are now becoming very well-understood and viewed on a nightly basis.

In these environments, there’s a really significant drive towards productivity. The value of the samples that are actually being used and shipped and stored in those low-temperature environments is increasing quite dramatically. Just think of an IVF cycle. An IVF cycle is thousands of dollars for somebody, and each of those eggs and sperm that are stored in those environments is actually extremely high value. You’ve got cell therapies that are increasing in their value as well. Sample quality is extremely important, especially as more clinical uses of samples is increasing. And cryo technologies are increasing dramatically as well. So that’s the minus 80 and minus 196 environments.

This image on the slide right now, these are real photos. And just to give you an idea, the video captures it somewhat, but I just really like highlighting what people do in these environments at the moment. These images are actually minus 80-degree freezes. And that’s a real photo that I took myself. It’s not set up at all. That’s what people are doing at the moment. They’re storing samples, that’s a high-tech facility, they’re handwriting on the boxes to which samples are stored. There’s blood and these vials here. They’ve got barcodes on them. And the barcodes, you literally cannot read because of the frost. So what that means is when somebody is actually collecting those samples to be processed and used, they’re actually needing to wipe the frost off the barcode so it can be read. On the right side of the page there at the top, they’re IVF samples stored in liquid nitrogen tanks. Each of those freezers or tanks can be holding 30,000 to 50,000 samples. And it’s a massive Marcet to where biological samples are stored.

That Marcet for us, it’s a huge Marcet. There are well over 2 billion samples in store with well over 300 million samples going in and out of storage each year. For us, we’re really focused on some specific target Marcets, that being in the biopreservation space traditionally called biobanking. That’s where there are over 300 million samples. That’s a 600 million target Marcet. The IVF Marcetplaces, we factor at around 50 million available to BlueChiip directly. And we’re very excited to be partnering with some major players in that Marcet. Clinical trials and research, 70 million. Cell therapies and pharmaceuticals is growing dramatically with 30 million to 50 million available to BlueChiip each year.

Why is BlueChiip different, we’ve actually got a MEMS core sensor, which includes 52 mechanical beams. The best way I like to describe it is it’s like a piano. It’s like we’ve actually shrunk down a piano, 52 beams with different lengths, each of those beams responding to an RF signal at a different frequency, we turn those beams on or off at the point of manufacture and that provides our ID. I always like to say that if you put a piano in liquid nitrogen, it will be very out of tune. So, as the frequency shifts, we’re actually able to identify the temperature. And that’s how our core technology works. It’s a mechanical device, which means it actually survives those very harsh conditions. Our closest related technology would be an RFID. That’s like your passcode for a door, or what’s included in your credit card, or what’s now on products that you buy at your local sports store like Decathlon.

What happens with…where BlueChiip differentiates is that we don’t need to be visually seen, we’re actually a remote wireless connection. We’re cryosafe. We operate. We actually do test every single chip that we manufacture in minus 196 degrees. We’re guaranteed unique ID. We’ve got a proprietary technology, which we control the ID, and it can’t be counterfeited. We’ve got an onboard sensor that we sense temperature. And we’re also sterilization proof. And this is a really important aspect when you’re dealing in biological tubes and samples that need to be [inaudible 00:17:13] irradiated to sterilize them so that when people’s genetic materials and the like go into those vials, they’re kept sterile.

What is our technology? What are we doing? What are our actual products that we’re putting in the Marcetplace? BlueChiip is the only organization in the advanced sample management Marcetplace that provides sample ID with temperature. That’s a granted patent in North America. And it’s really important and powerful for us. We sell embedded and BlueChiip-enabled storage solutions. So, we sell cryogenic vials that those blood, the plasmas, the tissue, etc., goes into. Each one of those cryogenic storage containers includes a BlueChiip chip and includes our core technology. We sell a range of BlueChiip readers. On the image here is a handheld reader, which allows people to be mobile walk around our facility and to check the ID of their samples. We also sell box readers that can read up to 100 samples at once. And then we’ve got a backbone of software. Now, we’re able to package all of this together into solutions for our end customers. We provide confidence in every sample. We’re redefining quality. We’re driving productivity. And at the end of the day, we provide confidence in every sample. And that very much is our end Marcet go-to proposition.

BlueChiip’s path to Marcet, we’ve got two paths to Marcet. And as I’ve mentioned a number of times, we’ve just launched our own range of consumables, that’s to go with our readers and with our software. Primary target Marcets for those products are biopreservation, clinical trials, and research, cell therapies, and pharmaceuticals. We’re direct-to-Marcet in North America, in Australia, New Zealand. And we’re working through global distribution networks, which we’re gonna grow out over the coming years and over the coming months to year. We’ve got a number of people on the ground in North America, and we’re selling directly.

Parallel to that path, we also work with OEMs. So these are large organizations that are already supplying product into the Marcetplace. And that Fujifilm Industries Irvine Scientific who sold into the IVF Marcetplace is a perfect example. We’ve got a license and development agreement that’s gonna run over the next 18 months to 24 months, where we’re gonna receive license fee revenue and development fees. And through that phase, we anticipate that we’ll enter a supply agreement where we will be customizing and manufacturing consumables for that Marcetplace to which Fujifilm Irvine Scientific will be selling those products. Every one of those products will be branded BlueChiip-enabled which is an “Intel Inside” Marceting strategy. And we’re very much committed to that with our partners.

So with that, just the foundations are really set for BlueChiip. It’s a really exciting time for us. We’ve been trying to…we have been working with multiple partners over the last number of years. But only just recently, in the last week, we launched our own range of products, which we can sell directly into the Marcetplace. And it’s a large growing Marcetplace. We’ve actually put the investment into building our chip supply chain. We manufacture out of Europe, and that’s well in place and well-positioned. And we’ve got a nice cash balance sheet. So, we’re very excited to be in the position we are and to be progressing into the future.

With that, I’ll open some questions, Marc. I’m sure there’s going to be a number of questions.

Marc: Yeah, we’ve got questions coming in already. So remember, if you’ve got a question, just type it in to the chatbox. Starting off with a question from Daniel, “How does one label brand or program the BlueChiip devices and feed those data into SAP or similar?”

Andrew: Yeah, so each chip we manufacture, and it’s a hardcoded ID, so we don’t actually program the chips. They’re programmed at manufacture. They’ve got a unique ID and that’s part of the anti-counterfeiting process. To then link that into a SAP or other, a lot of the systems that we actually deal with, hospital information systems or laboratory information systems, we’ve got an API that we can link into those systems with and operate there. We have a software database so every time we read a chip, we capture the ID and the temperature. We also capture the individual that’s working and handling the samples. And we capture the location. So it’s not just the temperature and ID, but we actually capture some other information, which is really important and powerful. We can set up our system to be able to monitor the temperature as we’re moving through a facility. And to give somebody an example of that, we can take a box out of a storage facility, put it into what we call a “Box Tracker.” And as that’s being moved around and handled, we’re actually tracking the temperature. And that’s really powerful and important. And that’s literally the product we recently won our international award for.

Marc: All right. More of a financial question. “Could you provide some insights on unit economics and what sort of gross margins are you targeting? Question from Glenn.

Andrew: Yeah, so just a little bit around the math behind it, our list price on the consumables is just under $4. So $3.90, this is all in U.S. dollars. Average selling price, we anticipate to be up there around the $2.50 to $3 Marc. Now, we’ve been silent on our gross margins, because we are dealing with multiple partner targets and the like. But we are achieving profit per item. So we’ve got good…we’ve got margin at the moment. And we’re still at the fairly early stage. As we scale and grow volume on our consumables and on our technology, that price comes down dramatically, but the end selling point of the products in the Marcet, so as the scale economies come on, then that margin improves dramatically.

Marc: Okay. Just in terms of the semiconductor industry globally and capacity shortages, really, how are you guys impacted by that, if at all?

Andrew: Yeah, it’s a great question, Marc. Look, we haven’t been impacted on that at all. So, we’re a MEMS device. We manufacture our chips on an eight-inch wafer. And it’s with a specific…there’s a handful of MEMS fab facilities around the world. We deal with several out of Europe. And on each of the eight-inch wafers, we actually get 14…well, it’s 13,000 to 14,000 chips, BlueChiip chips off each wafer. The capacity of the partners that we’re working with, they can process tens of thousands of wafers a year. So, that’s really not been an issue for us at all. And over the last 18 months, we’ve been investing on getting the scale into our chip manufacturing. And as I said, we’ve got the capacity, and as you see on the slide, got capacity to be doing 5 million to 10 million chips a year and we can scale that very rapidly and quickly. And we’ve got 3 million chips in stock. So from where we are with…we’re still entering the Marcet with our new products, those 3 million chips at $2.50 to $3 U.S. per consumable, that’s well and truly…it’s up to $10 million worth of stock.

Marc: Right. And I’m just wondering about today’s announcement actually. So, just put that in perspective, because I think it’s a very big announcement. How does that change the world for BlueChiip today from what it was like yesterday?

Andrew: Look, it is huge, Marc. In the past, we’ve been working with selling our core technology to partners. And we’ve been at the whim of some of those partners. And when you’re dealing with very large multinational organizations, these are pharmaceutical companies, these are the incumbents that are supplying consumables into the Marcets. You sit on a strategic priority list. We’re working with a lot of them, and we’re very happy to get Fujifilm to be partnering with us. So, that sort of meant that we’ve been at the whim of those large organizations. And so the announcement today is that we’ve now shifted our organization that we can sell direct to end customers. So we can knock on the door of end customers and go in there and actually deliver product. And that’s fantastic. It means that our own destiny is a lot more in our own hands. It means we can create our own brand. Now that’s not to say that we won’t work with partners. We see that the BlueChiip technology will be the gold standard. That’s our goal. It will be the gold standard in ID and tracking in very low-temperature environments. So, we will still work with them. But we’re out there talking to those end customers, and we can package our solutions.

The other thing that’s really important about it is that we’ve had our readers and software in the Marcet before. But now with the consumables, we can package that together as a solution. So we can do some combined packaging like selling our chips and offsetting the cost of the readers or the software as well. So that provides us a lot of flexibility and control.

Marc: All right. Just another question coming in from Daniel. “Can the chips be embedded into other products? Are there any constraints to read out the ID and the temperature and other data?”

Andrew: We certainly can be embedded in other products. So we’ve got some solutions that go in towards blood bags. So, we’ve got actually an adhesive label that’s just about to hit the Marcetplace, so we can stick our chips onto different devices. We can injection mold the chips into plastics. And we’re also looking at some of the glass replacement type technologies. So, the pharmaceutical vial type consumables as well. So yeah, we 100% can.

Any constraints to read out the ID and temp data. Look, you need to be relatively close to the chip. So it’s about five millimeters read range. And there’s really no constraints down in low-temperature conditions. We can set up readers that actually read the ID and the temperature in liquid nitrogen. And that’s hugely powerful.

Marc: All right, well, last question before we go onto the next speaker. If you look at what happened to Sensera recently, another MEMS-related company listed on the ASX, you can see that MEMS is really challenging if you don’t have proper scaling and if you’re not in tune with your end customer really to the level that you need to be to fine-tune production for them. What are your specific challenges? What are your biggest challenges right now in rolling out or scaling up production?

Andrew: Yeah. Look, we’re actually really well set. Your points are spot on, Marc. We’ve been for the last maybe three years, we’ve been developing our technology for a long time. And we’ve been working with our supply chain partners to actually scale that technology. So we’ve got really good quality and low cost. We’ve actually put that investment in, and it’s been a significant investment. I always get asked the question around IP, we’ve got 30 granted patents, but really our IP is in…you know, there’s a lot more behind our IP than just the patents. It’s around that investment in the technology and in the scale. So with that scale of 5 million to 10 million a year, which we can increase very readily to much higher numbers than that is…we’re well and truly at that point, but it has taken a long time to get to where we are.

Marc: All right. Well, congratulations again, Andrew, on today’s announcement. It’s a game-changer, I’d say for the company. And like you said, it’s good to have your destiny in your own hands. So…

Andrew: That’s it.

Marc: Thank you very much for your presentation and we hope to catch you next year as well.

Andrew: Fantastic. Thank you very much, Marc. And thank you very much everybody.