How a pivot saved an Adelaide biotech firm from ‘near-death’
This time last year, Clever Culture Systems had a “near-death experience”. A last-ditch capital raise and a market switch changed the company’s fortunes. InDaily sat down with CEO Brent Barnes for a candid conversation about the past 18 months and where the company is headed in 2025.
In mid-2023, the CEO of Clever Culture Systems (CCS) Brent Barnes was in the centre of a “perfect storm”.
The company’s share price was in the doldrums, hovering around just one cent per share. The commercialisation of the business’ technology – an AI-powered agar culture plate reader – was slow, to the chagrin of investors.
After all, CCS – formerly LBT Innovations and on the ASX under the ticker ‘CC5’ – once traded at around 60 cents per share. Investor value had massively deteriorated, and the business was running out of money.
Something had to change, and by shifting gears and pivoting to servicing the pharmaceutical sector instead of the clinical market the firm’s fortunes are looking up.
In August 2022 CCS announced it would try to crack the $10 billion microbial quality control market. Barnes and his team – based in a lab just off Waymouth Street and a stone’s throw from Proof wine bar – then repositioned their Automated Plate Assessment System (APAS) to suit the new market.
CCS hopes to replace some of the incredibly manual work that happens in laboratories which – under regulatory standards – must regularly check for microbial growth in clean rooms.
The APAS system does just that. It can read 200 culture plates per hour with more accuracy than the human eye, does so in an automated fashion, and has achieved regulatory clearances in the United States, Europe and Australia.
This has piqued the interest of one of the world’s largest pharmaceutical companies – AstraZeneca (valued at $162 billion) – which came on board to fund CCS with more than $1 million in capital to develop a new AI algorithm for pharmaceutical manufacturing in December 2023 and has since purchased nine APAS systems for use in-lab.
It looks a bit like an office printer, but CCS’s APAS instrument uses AI to assess culture plates in pharmaceutical manufacturing clean rooms. Photo: CCS.
As such, 2024 has been a bit of a return to form for the company which now has some income from the sales of the machines plus recurring revenue from software.
“The company had a near-death experience a year ago,” Barnes told InDaily in a candid, sit-down interview.
“We were in a bit of a perfect storm where we needed to raise capital and we were at a point where we’d moved into this pharmaceutical manufacturing pivot for the technology, but we hadn’t commercialised – we were still in R&D – so we had a real challenge to find opportunities where capital could be raised.
“If we didn’t raise capital, it would have been a very bleak outlook for all investors.”
CCS did end up raising some cash – $4.5 million of it – in December 2023. This allowed the company to recapitalise, clean up its balance sheet and fast-forward towards commercialisation.
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It set the foundation for 2024, which has been successful for CCS in terms of generating revenue.
In February this year, the company announced it had sold its first APAS PharmaQC machine to Thermo Fisher Scientific, a global contract drug manufacturing operation. At the time, CCS said the sale demonstrated “the positive market interest from pharmaceutical customers” and was “six months ahead of previous expectations”.
Australia-based NovaCina was the next customer in April, which acquired the machine under a five-year agreement valued at more than $700,000.
But the big-hitting announcement came in August when CCS said it signed an agreement to sell five APAS instruments to AstraZeneca under a contract worth between $3.4 million and $4.1 million.
US-based Bristol Myers Squibb then bought one machine in October, followed by the purchase of four more APAS machines by AstraZeneca earlier this month.
As for the company’s market cap, in the last year it’s grown by about $15 million and the share price has risen to about 1.7 cents.
Barnes told InDaily that the pivot to the pharmaceutical sector “was a huge success by all accounts”.
“The key highlight was AstraZeneca buying now nine instruments. They made a decision to standardise our instrument across all of their major pharmaceutical manufacturing sites for the purpose of environmental monitoring – looking at the cleanliness of their clean rooms.
“Bristol Myers Squibb is another big pharma customer, and Thermo Fisher Scientific is a contract drug manufacturing organisation.
“The maths there gets us to 12 instruments, and we’re really excited.”
Barnes’ big leap
CCS CEO Brent Barnes. Photo: Supplied.
The CEO of CCS is not a stranger to listed biotech firms, and knows the difficulties in keeping investors happy through long R&D lead times often experienced by public firms developing new innovations.
Prior to CCS – where he’s now been for just over eight years – Branes was at ASX darling Cochlear for more than a decade in various managerial positions before becoming director of Asia Growth Markets & Operations.
He was “head-hunted” for the CEO role at CCS, but told InDaily it was “hard to think about leaving” Cochlear.
“When you’re working for a company that’s restoring hearing, which is a core primary sense, you get to see the difference it makes on so many people’s lives,” he said.
“It creates a real passion for the sector in terms of biotech/healthcare. But after 11 years it was enough and I saw the opportunity at the time with the Automated Plate Assessment System which was still in the university but going through early clinical trials.
“It was early-stage but really fantastic technology and I saw a lot of potential there and made a decision to move across.”
He made that decision in 2016, and said “things have taken longer and cost more” than anticipated.
“We’ve had a lot of bottlenecks and roadblocks along the way, but we’ve navigated that journey.
“It’s not uncommon when you think about biotech companies – a 10–15-year horizon is something investors typically should consider when thinking about jumping in.
“It’s about picking that right time in a commercialisation journey that you’re willing to take some risk of investing.”
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The APAS technology came out of the University of Adelaide’s Australian Institute for Machine Learning, at the time called the Australian Centre for Visual Technologies. The company itself was formed in 2013 when LBT Innovations signed an agreement with Switzerland-based laboratory instrumentation company Hettich AG Switzerland to complete the development and commercialise of the tech.
University of Adelaide tech is the core of CCS’s product range. Photo: CCS.
“It’s great to invent something, but moving from the invention into commercialisation and bringing the product to market is tens of millions of dollars,” Barnes said.
“We recognised that it wasn’t possible for us to do that and fund that ourselves, so we found a partner company to help us find it.”
The firm was founded as LBT Innovations but this year changed its name to what customers would recognise the company as: Clever Culture Systems.
“It’s only the investors who viewed us as LBT Innovations, hence the name change,” Barnes said.
“It wasn’t really a name change for the sake of changing names, it was really just trying to streamline communication because it was quite annoying talking to customers and they’d say ‘Well what’s LBT Innovations?’ and you’d just waste time talking about this background of the JV which they didn’t really care about.”
It was only in the last couple of years that CCS acquired 100 per cent of the joint venture, but Hettich remains a shareholder in the listed entity.
“We’ve retired LBT Innovations and moved across the CC5 – our new ticker code – and Clever Culture Systems has really clear messaging,” he said.
The next target
With sales of the APAS machine now coming through semi-regularly, Barnes and the CCS board have set the company a new goal: to become cash flow positive.
He told InDaily that the company was “on a path towards that” and that there’s a “real opportunity for us to potentially get there in fiscal year 25”.
“I think that’s very important and that’s a key focus for the company,” he said.
“We can only do that if we continue this commercialisation success. Our number one priority is what we call business as usual: let’s make sure we’re selling what we’ve got and let’s do that really successfully.
“Twelve instruments is great, we’re just getting started. But we have a mountain of opportunity in front of us and we’re year one of launch. Let’s get into year two. Let’s do better than we did this year.
“In year two we want to be cash flow positive and that will open up new opportunities for potentially new partnerships, for maybe having a broader product portfolio with a smaller version of the instrument, and generating additional scale for years to come.”
Still, at 1.7 cents, it’s unlikely shareholders are overjoyed at where CCS is right now despite the leaps and bounds the firm has made in recent months.
“We’re probably at a new baseline, but we’re not happy with that,” admitted Barnes.
“I think it’s good for everyone thinking about the last 12 months, but it’s far from where we want to take the company.
“We want to take the company into a position of being cash flow positive. Not many biotechs in Australia can say that they’re on a path to being cash flow positive, so that’s an important metric for us.
“We’ve got to grow the top line while protecting the bottom line. I think the strategy here is being considerate about our investments and what we want to do is become EBITDA-positive and grow that bottom line and not get ahead of ourselves, to grow the top line at risk of not making any profit.”
CCS’ share price has improved from where it was this time last year, but still has a way to go to return to previous highs.
Barnes said he wanted to be clear that “we’re not looking to go back to shareholders to fund keeping the lights on for this company”.
“We want to make sure that we transition this business into being self-sustaining and that’s not in one year, that’s through multiple years, and then I think the share price will take care of itself.
“I think that every CEO thinks their share price should be worth more, but I can tell you that at least from a board and a company perspective, I’ve got this number of $100 million or $150 million market cap in my mind as at least a step one.
“I’m not going to be one of these people that’s going to say ‘we should be a billion-dollar market cap’ when we’re sitting at $35 million right now. I think that’s unrealistic.
“I can tell you; I can see a path based on what our sales pipeline looks like…in the engagement we’ve got with our customers, I can see our sales justifying a market cap of $150 million in the near-term – call that 18 months, two years or thereabouts.
“We won’t say that’s our target, but we can certainly see a pathway towards that and I think that’s the realistic piece.
“But being a small cap, I will say the caveat there is these things can change and risks happen. We’re at the more risky end of the market than others but we’re mitigating those risks. I think with a solid install base, the recurring revenue, it’s going to be an important part of our stability going forward.”
