Biotage AB (publ)

Thank you very much. Good afternoon, everyone, and thank you for joining us on our interim report Q3 call. I'm Thomas Blomqvist, president and CEO of Bytosh, and I'm here with our new CFO, Andrew Kellett. Before Andrew goes to our Q3 results, I will share some highlights from the quarter. And as always, we will answer your questions at the end of the call. So let's start with our executive summary on slide five. Despite the market headwinds, we see many positive developments during Q3. For example, in Q3, we witnessed a reported all-time high phase of 449 million SEC, which is a growth of 12% year-on-year. An improved gross margin of 2.8 percentage points up to 62.9%. An improved cash flow from operating activities of 103 million SEC, which is 6 million better than previous year, and 52 million SEC from the previous quarter. And a lastly robust adjusted EBTA of 117 million SEC improved for the third consecutive quarter. And this despite the fact that we have increased our R&D investments to 58 million SEC to ensure that we continue to build an attractive future pipeline of innovative products and solutions to our customers globally. Our largest markets, the Americas and EMA, representing this quarter more than 80% of our revenue, have grown not only in Q3, but also year-to-date. The market situation is still challenging with reduced capex investments in general impacting our system sales. And in APEC, and in particular in China, where there is declined market demand for our small molecule systems. We're tackling this by diversifying our local business in China with, for instance, an increased focus on growing market areas, running key account management programs, and maximizing our geographic coverage through a strategic use of distributors. Drug discovery is a dynamic, innovative industry that requires new products and solutions for breakthroughs. And we're certain that capital expenditure will bounce back. We're already seeing some signs that the hesitancy among customers to invest in new systems has softened a little bit throughout the year, and our consumables destocking impact has also lessened quarter by quarter. Naturally, we keep working actively to ensure that all our businesses have the right size cost base to continue to trade profitably while we maximize the market opportunities. Four out of six product focus areas are growing during quarter three. Diagnostics, which includes our oligonucleotide business, grew 50%. This shows that our integration process is running according to our internal plans and that the customer awareness for our world-leading solutions for making and modifying complex oligos has increased the past year. We're now four months into getting to know our new group member, Asria Bio Separations, and are still confident in achieving our internal 2023 top-line targets, and we see a similar revenue seasonality as in 2022, with heavier sales at the end of the year. Asria Bio has had a positive impact on our performance since the acquisition by generating 120 million SEC in sales, a gross margin of 63% and an adjusted EBTA of 10 million. The biologics and advanced therapeutics product area accounted for over 20% of our business in Q3, contributing to the reported EMA and consumables growth and is in perfect line to our strategy to position ourselves in attractive niches and driving recurring revenue. Our aftermarket ratio was 65-35, with great double-digit growth in both service and consumables. Astrea shared some exciting news during the quarter by launching scaled-up versions of their disruptive nanofiber technology. These technologies have been tailored specifically for the purification of cell and gene therapies. In addition, Astrea announced the expansion of its manufacturing and warehousing capabilities in the US with a new 12,000 square feet facility in Canton, Massachusetts, to support the growing demand for its chromatography solutions and improving our speed of delivery in the Americas region. With that, I will hand over to Andrew, who will go through our Q3 results and present his own thoughts on the Bytosh Group business a month into his role as the new CFO.

Thank you, Thomas. The next couple of slides show the revenue composition of the group, firstly by product area and then by geography. One headline comment I'd like to make is the diversification of products and geography, which is a real strength for the group. Now, biotage has a strong position in the biologics and advanced therapies area. We're able to offer a broader range of products in more markets. Overall, we delivered a strong performance in Q3 when set against the backdrop of the market environment right now. We grew our revenues in biologics and advanced therapies, analytical testing, diagnostics, and water and environmental testing. With the benefit of Australia Bioseparations, our biologics and advanced therapies business grew from approximately 4% of our total business in Q3 2022 to over 20% in this quarter. We saw revenue declines in our scale-up and small molecule business due to the well-publicized challenges and the unwind tale of COVID aftereffects and near-term customer caution around instrument purchases. Although it is worth noting that the rate of organic decline in system sales eased in Q3 versus Q2 by approximately five points, from minus 25 to minus 20 percent. What I want to comment now is about the impact of Australia on the business. Australia is a growing business and not at a stage where it neatly fits into a stable non-seasonal quarter format like the core business. So you're going to see quite large quarter seasonality until the business achieves a larger scale and we can see the underlying real seasonal trading patterns quarter by quarter. Looking at an isolated quarter of just taking the year to date and divided by the number of months is not going to give you meaningful future core forecasts. That said, we expect Estrella seasonality in 2023 to be broadly similar to that of 2022. Over the last few years, significant investment has been made in all areas of the Estrella business, from R&D, commercial, operations, support, new systems and facilities, so that attractive growth can be delivered. So in the short term, this cost space will subdue profits. But as the business grows, profits will accelerate, i.e. we have a very scalable business where we can add significant revenue without a step change in the operating cost space. In Q3, Australia delivered 73 million revenue, 73 million revenue, 47 million of gross margin, and a break-even adjusted EBITDA. Since acquisition, Australia has contributed 120 million revenue, 76 million gross margin, and 10 million adjusted EBITDA. The reported negative EBIT of 45 million reported on page 21 of the Q3 report comprises DNA of depreciation amortization of 22 million, including 18 million of amortization of acquired intangibles, and 33 million of one-off transaction costs. So, to be clear, Astraea, since acquisition, has delivered positive profitability at the EBIT level when we adjust for amortization of acquired intangibles and one-off acquisition costs. Since the 1st of January, Astraea has delivered 229 million revenue growth 38% versus 2022. If we look at our regional sales slide, our Americas and EMA business showed reported growth in the quarter and year to date. Together, these contributed approximately 80% of our total business, with APAC accounting for the 20%. Like others, we are still seeing headwinds in this region, especially China. Chinese business has significantly benefited over the last few years from COVID. That has unwound in 2023. But we still have a business in China that is broadly the same size as it was in 2019. So while year on year we are seeing sizable revenue declines, we still have a scalable business there that we can build on. We have and will continue to take action to ensure all our businesses have the right size cost structure in place and continue to trade profitably. We are small enough to be nimble, make quick decisions, and refocus when we need to. We are introducing a new key KPI which Thomas and I will be using to assess the performance of the business, and that is adjusted EBITDA. This ensures we get clear visibility of real trading performance and can understand the trends not affected by either large or one-off unusual costs and non-cash accounting entries such as depreciation and amortization we have presented the adjusted EBITDA figures for the current year in Q3 year to date and the comparatives overall we delivered a robust adjusted EBITDA in Q3 of 117 million only 11 million lower than Q2 the Q3 2022 And that was despite having R&D investment of 58 million in the quarter, a 66% growth or an additional 23 million SEC versus Q3 22. Year to date, we have delivered 324 million of adjusted EBITDA of near 27% margin. A combination of stronger margins and intelligent cost control has driven this, while ensuring we are not cutting costs, which may help in the short term, but hinder our long-term prospects. Lastly, I want to take this opportunity as the new CEO coming in to give my first impressions. So here's what I see. A business that has attractive gross margins and has the strength to defend those margins, even in a cautious market. A business that year to date has delivered 324 million of adjusted EBITDA. Business that is continuing to invest meaningfully in R&D for future success and be at the forefront of innovation leadership. A business with a strong balance sheet backed by gross cash of half a billion sec and net cash of a quarter of a billion sec. Q3 cash generated from operations was strong at 103 million. A business that by combining with Australia Biosuperations has become stronger, more diversified better able to offer customers a broader range of products and services in more markets and be better able to withstand market turbulence now and in the future. Yes, there is a bit of market turbulence currently for us and everybody else, but we have a set of attractive assets focused on the right markets with a highly committed and engaged employee base with a passion to win. The future from where I'm sitting looks exciting. Back to you, Thomas.

Thank you, Andrew. We can now move to the Q&A session.

If you wish to ask a question, please dial star 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star 5 again on your telephone keypad. The next question comes from Simon Larson from Danske Bank. Please go ahead.

Good afternoon and thanks for taking the question. So maybe starting on Austria. So yesterday we saw Dana who reported Q3 numbers. Sales for the chromatography business Cytiva decreased with some 20%. And I think they said also they don't really see market conditions improving until 2024. So first I'm wondering, are you seeing what they are seeing in terms of the market development? And secondly, given that Austria is active in many of the same market segments, Could you help us understand what will drive Australia to outperform the overall market in the coming year? Is it specific customer projects you're seeing ramping up or something else here? Thank you.

Well, Australia, I think in the third quarter, delivered growth versus the third quarter of last year. And I think what you've got to think about Australia is it's a growing business. It operates in a large market and is actively growing and acquiring share. I suppose if you talk with the management of Australia, they'd say they're doing things differently. We're actively engaging with customers. We're selling them solutions, not just a product, any old product. We want to understand their problems. We want to give them solutions and that's how the Australia business is growing. Um, you know, we've got a huge runway and a huge market to go after. So I think we, you know, we are boxing clever in the market. Um, yeah, I mean, we, we can't defy gravity in the market, but we, with, with the assets we've got with the leadership we've got, you know, with the, with the attitude in terms of, um, you know, trying to solve problems, not just selling not just selling off-the-shelf products. That's where we think we are winning in the market.

And then, yeah, I think I have a question there, Simon. Maybe then, yeah, alluding to your general sentiment question, where you had picked up some comments from the peers in the business. So we're, of course, looking with buy-touch classes, even though, yeah, we're keen and know what's going on in the business. We see the drug discovery market as a dynamic, as a progressing business as it has ever been. You could probably also see on some of the commenting coming from us is also that we've seen also some slowdown of softening parts in the reductions of both the systems and consumables. So for instance, if you followed us, you can see that we started in the year with a dropping point of minus 25%. That's now rather in the 20% range if you look for organic growth rates, which is probably the most fair way of judging the performance. So we see a stabilization pointing in the positive direction. And we see the same with the consumable side, where we kind of started with dropping minus seven and now we're rather in the minus 3% range from an organic growth perspective. At the same time, we also see a better flow when it comes to supply chain and moving parts. So yes, we're looking based on your comment, probably somewhat more optimistic. And it might also have to relate to the fact that we were starting to see these signs already in Q4 as well. Thank you.

Okay, yeah. Thank you. So maybe secondly, on the STREA scalability, you obviously mentioned you've done quite some heavy investments into the organization as of late. Could you give any indication on the trajectory forward in margin trust for the business? Do you expect STREA to contribute positively to EBIT for the next fiscal year?

Well, I can maybe start there with giving... Yeah, I will keep repeating what I've said. Yeah, in the past quarters and since this was known. So we're expecting Astrea to contribute positively obviously on top line. They should be at par and very quickly improving our gross profit margins. It will take us some time. To Andrew's comments, this is a turnaround case and we're in the finalization of those stages and we don't want to interrupt those lost efforts. We're commenting, for instance, about the Canton, Massachusetts investment, which has been one of those lost things. But then also to our previous comments, it's already providing profit for the business, and that's going to be better and better as the volumes grow. And maybe lastly on that one, I keep repeating both Andrew's and my message that we see the same seasonality of the Australia business in 2023 as we saw it in 2022. So the confidence on our own internal targets remain firm. Thank you.

Okay, that's fine. Maybe the final quick one on the oligo business, obviously performed very well here in the quarter. So any main reasons that drove that growth in the quarter?

No, I think it's just the logic into the way how the machine of BioTosh has been operating the past 10, 15 or even 26 years. We're taking the time to get to know the customers, to get to know the market and the business. And then we put a strategy and a strong team in place and off we go. And that's really what you're seeing here. There are a few things maybe standing out. which is that America was basically a zero region for us that is now already providing millions for the business. So a substantial growth in terms of that small region becoming bigger. And then we're also very successful with the key account management programs where we're also supporting each other across the continents. And of course, for this specific quarter, This was an all-time high for us and it was driven of a record quarter in EMA We have some solid customers where we have build a a Interesting future plan with Thank you, so quite quite broad-based it sounds them.

Okay. Thank you so much guys taking the questions Thanks, Simon

The next question comes from Carl Noren from SEB. Please go ahead.

Yes, thank you. Firstly, one question on Astrea. I mean, you mentioned that you expect the seasonality to be similar to last year, but we don't have last year's figures, so it gets a bit tricky. Just if you could comment on anything on how much of the yearly sales in Astrea was done in Q4, it would be very helpful.

Yeah, Australia was quite predominantly Q4 weighted last year. We expect that to be the same. It's kind of difficult for us to give precise numbers because obviously we're not allowed to, but I think we do see a weighting, much more strong finish for Australia.

without waiting in q4 okay so sales should accelerate a bit from q3's level it's fair to assume that's right yes i think that's right yes yeah that's great and then another question following up on simon's question i think there are some misunderstandings here today on on the profitability of astria uh when it has been a part of biotosh because if you mentioned on the caller that the one ops uh and the DNA in Astrea since you acquired it. So I was wondering, am I doing the right calculation? But I see that Astrea has had an adjusted EBIT model of around 5% since it was integrated or consolidated into Biltage. Is that roughly the correct figure?

Yes, that's right. I mean, in page 21, I think people were looking at, you know, we report that the reported negative EBIT of minus 45 million Now, 55 million of costs are either one-off or non-cash accounting DNA. Well, actually, you know, since acquisition, Australia has delivered a positive 10 million EBITDA and then 4 million DNA, you know, normal DNA. So, in fact, its EBIT has been about approximately – millions its acquisition not 45 so i think the the whole um the whole um the whole ton you know these one-off transaction costs that the business incurred plus the acquisition of acquired intangibles is kind of really clouding that underlying profitability in australia is profitable um yeah that's a good clarification yeah and then we hope that it's also uh

increases profitability and when sales continue to grow, we're going forward.

Yes, absolutely. Yeah.

Yeah. And then just a question on the comment on instrument sales, which are seeing that demand or the customer willingness to invest has improved slightly early quarter. I'm just curious, are you seeing any differences between the regions or different customer segments or where are you seeing this slightly positive development?

Yeah, those are primarily skewed towards our biggest performing ozone regions, EMAA and Americas, now covering even above 80%, 81 to be precise. So yes, we do see a geographical variance in the APIC region that is more dramatically affected, and we think that will take us a bit longer to come back on track. So that kind of laggards what we started to experience, yeah. rather in the beginning in Europe and America.

And is it CDMO, CRO sales? If you look at different types of customers, which ones are broad-based?

Well, when we do that analysis, we see that it's coming across. And I think the general red thread that you commonly see is just the... constant cash flow focus, which of course is driven towards the cautiousness of CapEx investments. So the working capital and cash flow focus is kind of hindering a lot of companies, new or mature, rich or poor, to have the same kind of attitude and behavior. But again, to our comments, we see some lessening and softening effects, both in systems and consumable side, which will be very good for our industry and also for BioTorch.

Thank you. That's great. And just the last question. You have a quite strong balance sheet here with an F-cash position. Are you out there scouting for M&A or do you want to consolidate Astrea first? Or how do you view it, Thomas?

Yeah, we are so excited to get to know our new great asset with the Astrea Bio team, and it's fantastic people, and it's a great solution. So that's for sure our focus. But I have to be fair. I mean, it's constantly on our agenda. where we're looking into both how we will build, how we will partner, and what we need to buy to become the striving life science and diagnostic tools factor out there. But again, short term, our focus is to integrate the new asset. And then time will tell. Again, I can repeat that we know precisely what we want, and that's also a timing factor.

Sounds good. Keep on fighting out there and speak soon.

Thank you. Thanks for the call.

As a reminder, if you wish to ask a question, please dial star 5 on your telephone keypad. The next question comes from Odysseus Miniciotis from Burenburg. Please go ahead.

Hi, thanks for taking my questions. I had one on top line expectations first. So could you please tell us what trends you're seeing on the order intake side of the business? Just to have a think about how you're looking towards next year, given some of your peers have been commenting on broader weakness that is expected to be amplified in Q4. Do you expect to grow above the usual mid-high single digits in 2024? How do you see it based on current ordering trends?

Well, we're still kind of putting our initial thoughts around 2024. Clearly, it's more of a challenge at the moment. Obviously, we are cognizant of what others are saying in the market we're taking. of feedback from our from our field um and understanding so we don't necessarily have a have an overall view yet of what 2024 is in in black and white um clearly as we've seen this you know the the system sales and is easing um in terms of the deceleration so that is good um you know we We also know that our declines, although we've been buffeted by negative news flow elsewhere, our declines, when you compare them, say, against Danica, Danaher and Sartorius, we are better. So I think, as some of our remarks, we are smaller. Therefore, we can be a bit more nimble. We can punch clever. We can attack different areas. So we can That helps us in a tough market to go after things and get things easier than some of our bigger competitors. But I don't think we've seen any ordering coming through. So from that respect, things at the moment are not any different from, I suppose, what we've commented on so far.

Thank you, that's all clear. And one on the EBITDA level as well for this quarter. I mean, if we exclude the sort of Austria dilution here, it does look like your adjusted EBITDA was quite strong, especially on a sequential basis. I mean, what factors that brought that strength are sustainable and to what extent is it driven by a better quarter for diagnostic, for your oligos business. Is it seasonal demand coming for flu testing perhaps, or should we expect this to be a sustainable level to use from quarters after?

No, I don't think there's anything that's, you know, any material impacting Q3 that's kind of affected the results. You know, I think what you've seen is some stronger overall margins coming through. You know, that's both the core business and Australia helping to deliver that core margin expansion. And also, we're managing the business prudently. We are managing the cost base. We're not being silly with it. As you can see, our R&D spend has jumped quite significantly in the quarter. I think if we were just diving for the line you know, to pump up profits, we would have, you know, throttled that back. But, you know, we recognize that kind of R&D is a source of future growth for us. So we're putting money behind that. So I just think it's just, I think, resilience of the business that's able to kind of have good margins. It's able to defend those margins. It's able to kind of, you know, intelligently control its cost space while also continuing to invest in areas which are going to drive the future growth and as you see you know kind of um you know our adjusted debit dar 117 million was only just 10 11 million below last year despite us you know spending a lot more in r d uh this quarter so even with lower um you know lower core sales uh than we did last year so i think um you know i think there's nothing i think it's just a general sound business principles that are driving the business profitability upwards.

That's all clear. Thank you. And the last one on Astria. Sorry if I'm being repetitive here. I just really need to get a sense of the magnitude of that seasonality. Does it make sense to think that in 2022 Q4 was close to half of the year's sales, or am I going too far?

Well, yeah, I think you've got the color already from Andrew to what we do, what we can say. Yeah, so I think that that could be sufficient. But again, we remain our confidence in the business and that we see the same seasonality pattern coming across. And you've heard me repeated the same that we're expecting a a stronger second half. And I can also be confident still around that message even four months ago.

Yeah, it's going to be seen. I think we're reading this morning that just almost dividing the current year divided by nine gives you a running rate. That would not be the way to view Estrella at the moment.

Oh, very clear. Thank you.

Thank you so much, Odysseus.

The next question comes from Matthias Hagblom from Handelsbanken. Please go ahead.

Yeah, thanks so much for taking my questions and welcome, Andrew, to this forum and congrats on the road. So I wanted to get back to Astria. Sorry for this being today's topic, but it's the first full quarter with the companies, we're still getting familiar with it. But I think I heard you, Andrew, say that Astria grew 38% since the company was consolidated or assuming the company was consolidated in January. So I wanted to understand that a bit better. Is that in local currencies or is that taking the weeks we just scroll into account or how do we get to the 38%?

The 38%, yeah, that's quoted in effectively in local currency, in GBP. So, you know, year to date, the first nine months, the business grew 38% in local GBP currency. And the 229 million, is effectively the average SEC GDP rate for the year converted.

That's clear. And I'm not sure we're going to get any further with the seasonality, but on this topic, Since Astria sells solutions, mainly consumables, I would be interested to understand why it is so seasonally strong for Q4. Most often that profile is from capital equipment companies when customers exhaust their budgets during Q4 because they know they're not going to get them on top of what they get for next year from their executives. So why is Q4 so seasonally strong for Astria?

Well, again, I think we should also not jump to conclusions too early. We're also four months into learning the business. So we'll see over time whether this is a seasonality that will remain the same. So I kind of understand your comment there and question mark around it. So that's more for the future to pave out whether that's going to That's going to be, I think what's important is also that we train ourselves, that this is more of a project related business, similar to the scale up business in the vitals core. You have longer lead times or sales cycles with it that way from a sales perspective. So normally you're working between three to up to 24 months before we get it. So there would be lots of more volatility. Andrew and myself will be sitting calm in the boat if we see that the trends are trending in the right direction. And there might be some ups and downs like in life, like in business, also on the road forward.

Thank you for that. On the net finances, 19 million krona negative related to earnouts. That was higher than last year, and it seems that its consensus carried maybe minus one. So any thoughts on how to think about this line for Q4? Are these earnouts linear or booked for some quarter only? I'm trying to understand the volatility here.

They should be. The earnouts should be linear. I think that part of that is the kind of the way we're accounting for the kind of Australia earn out. And I think that's probably what is, you know, the earn out payment. And I think that's probably what is kind of driving that in Q3. Because, you know, we kind of have to discount the we discount the earn out to its net present value and then have an unwind through the interest line. So you're going to say that's the first time you've seen that in Q3 is that kind of unwinding interest, which is the way IFRS technically thrives to do it. So you bring effectively then the next large up to what you're expecting to pay. on the on the earn out so it is a technical it's just it's not a it's not a it's not a real interest it's not an interest going out it's just an ifrs technical way of accounting for earn out okay so we should we should assume a similar one but it's a non-cash item it's not counting right yeah okay yeah

And then maybe last for Thomas, Thomas Fisher here doing a parallel conference call just shared their initial thoughts on 24 and the guide for similar as 23, which for them is likely to be plus one well below that company's historical trend. So anything else to add from your perspective in addition to the comments made earlier that your weakness started earlier than some of the other peers in the industry, how to think about next year?

No, I think again, yeah, we've said what we can and should, but you should also always know, regardless of the market situation, yeah, we want to always grow double the market. And then we're just going to adopt, of course, to the market circumstances. It's apparent when you see the commenting that we're probably seeing the business perspective with somewhat more positive glasses upon. So, yeah, time will tell. We're focusing on our things and we have a great team in place. clear strategies and action put in place to become the leading life science and diagnostic tools company in the space. And that's what we keep on operating upon. So sorry for not providing more clarity than that.

That's helpful. Thanks so much.

Thanks, Mattias.

The next question comes from Victor Sundberg from Nordea. Please go ahead.

Yes, hi, thank you for taking my question. One here also on Astrea, and thank you for clarifying the non-cash and one-offs on EBIT. I had a follow-up on that first. I mean, specifically, you had 73 million in sales here in Q3, but I just wonder what the EBIT was specifically in Q3 when you adjust for non-cash and one-offs. And also, how has this developed from the first half of this year pro forma to now? And maybe also how we should think about this going forward. I mean, the EBIT is, of course, below the biotage group now as you invest a lot in to reach this growth. But how should we look at this for next year? When do you think it would be in line perhaps with or above the biotage group, that would be very helpful. And maybe, as this is specifically negatively impacting by the increased manufacturing capability here in the U.S., could costs drop off a bit here when this is done in the end of 2023 when you've built this manufacturing facility in the U.S.? Yeah, I think I'll start there.

Okay, if I take those in order, so in, in Q3, Australia kind of delivered a broadly breakeven adjusted EBITDA. So we delivered a small EBIT loss. Since acquisition, the business has delivered broadly a 6 million positive EBIT. And obviously, then you've got the The 55 million then of one-off transactions cost 33 million of one-off transaction costs and 22 million of DNA. So, yeah, that is a clouding, but kind of stripping those out since acquisition, the business has delivered positive EBIT. And that's just the point that I made a bit earlier about the business has significantly been investing in its business. And obviously, that then does mean that in the short term, those profits are going to be subdued. Yes, the EBIT is going to be a lot less than the core business, the Bytage core business is delivering. But as that Australia business grows and that cost base is now in place, you start to going to see an acceleration in profitability because you know it's it's there the costs have been incurred it doesn't need to incur any step change in cost space to to to deliver the additional revenue so you know that is all good like you know the our manufacturing base once you know once we've once we've got that you know we can just sweat that asset more we can push more um push more volumes through it and that you know you know the unit cost of the manufacturer then become cheaper and cheaper so you know that's So it's kind of a bit of a medium, long-term game. You put the investment in, put the costs in. Yes, in the short term, that's going to be subdued profitability, but in the longer term, you're going to reap the benefits. So we've So in terms of capital investment on our business, yeah, we're putting investment into both the manufacturing site in the Isle of Man, but also, as you notice, opening an expanded facility in Boston. So these are all kind of growth-minded investments to fulfill the future growth that we believe is coming. and also for us to attack much more the U.S. market, which obviously is a very key market for us, reducing times it takes to fulfill customers' orders. That's a very positive thing. But this year, I'd say, is a transition year for us. And we're going to... you know, we kind of look forward with confidence. I think the, yeah, I mean, I think the, I can't really probably add more than I've said in terms of the investment we're making, the cost we're making, you know, the, you know, we probably, you know, we'll do, be more clear in terms of, in terms of our profitability, in terms of Australia, to make sure that we kind of are pulling out the one-offs and the DNA so we can, you can, everybody can really understand the true underlying profitability of both the Australia and the core business.

But also, again, if you look into the current plan, we are, to our earlier comments, we're in the finalization of the turnaround case, which means that we foresee maybe at the the summertime or Q2 we will more move into the normality. So what we're saying is also we're coming to an end of the more capex heavy related parts in the next let's say two quarters.

Okay thank you and can you just help me understand quickly why you wouldn't need to increase head count a lot in order to push sales for those three products. As you said, you can just, you know, get higher margin as we go forward from here.

Yes, I mean, you would need to increase, but not necessarily, you know, a significant step change in the cost base. Yes, I mean, we, you know, kind of looking at, you know, we would add certain sales, but also, you know, kind of specialist in-field applications that kind of assist in in with with the sales team so these are normal growth um costs you would incur but um you know you've got you've got all the manufacturing which is a no fixed cost all the other costs there which are predominantly now been invested in so you you you're not kind of to to to to fund the growth that we will see coming forward you don't need to start powering huge amounts of costs into the been made.

So we now have a very good geographical coverage and what you should know, it's not long ago where there were four people covering the global space from an Astria Bio perspective, which are now 12. So it's been a rapid acceleration in investment where we're now happy with the current state.

You mentioned one related to the acquisition. How should we think about this? When should we expect this to decrease going into Q4, perhaps next year, and the amortizations related to the acquisition and so on?

Yeah, the one-offs are basically all, you know, those are, you know, effectively the stamp duty that you pay in the UK on acquisitions, all the kind of lawyers and accountants and all that. And all that's effectively been incurred now. So, you know, the vast bulk of those one-off costs have been incurred and are gone. You know, then you've just got the ongoing amortization of acquired intangibles and other depreciation and amortization. Okay.

And a final one, as some other people here have said, some of your peers have guided for normalization in terms of inventory levels, but they also guided for that maybe perhaps the bigger pharma customers or the bigger CDMOs have seen quicker normalization of inventory levels and some of the smaller are guiding for perhaps that inventories will remain higher for longer. So I just wondered what you see here or as your customer base, I presume it's primarily maybe in this multi-mid cap segment of BioPharm and CDMOs, etc.

Well, what you should see is that we have a fairly balanced setup of clients. So if you look into the three business, you can kind of maybe skew out that CDMOs would be one important part, but the biopharma companies are the same. And what you would see throughout the entire biopharma group is a very balanced portfolio of great companies we're working with. We're working with 18 out of the 20 biggest, you know, If you combine the assets where we operate, we see some positive signs now of biotech funding picking up. But regardless, we're focusing on our machine and we always want to outgrow the market times two. And that's what we're going to keep striving for.

Okay, that's all from me. Thank you very much.

Thank you, Victor.

The next question comes from Carl Noren from SEB. Please go ahead.

Hello again. Sorry for coming back to this. I just sat here and did some quick math in my Excel during the call. You said that Austria grew 38% in local currencies this year to date, as I understand it. And we have the full year figure for 2022. I mean, that means that almost half of the revenues last year in Australia are coming Q4. Almost. Is that correct?

I think, yeah. You know, Australia is heavily, you know, we kind of, you know, we expect a good Q4. We expect, yeah, I'm not going to kind of argue, but, you know, I'm not going to challenge your maths.

Okay. Yes, just wanted to check that. Good. Good luck in Q4 then.

Thank you so much, Carl. Thank you.

There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.

Okay, thank you. So to conclude, our performance in Q3 is predominantly positive, especially the all-time high sales. our improved gross margin, our improved cash flow from the operating activities, and our robust adjusted EBITDA generation. Also, most of our product areas and regions are developing well, and the development in the Americas and EMEA has been good throughout the year. Americas delivering record quarters one after the other, and EMEA would also have grown double digits with adjusted figures regarding the region's connection to the COVID-19 vaccine manufacturing. Our negative drivers in the business remains the same with our systems, small molecules and synthetic therapeutics and scale-up business, and from a geographical standpoint, the APEC region driven by China. This was also the first full quarter with our new family group member, Astrea, by separation. who, again, is already contributing and driving our business in the right direction, moving up to larger and faster addressable markets and also driving our recurring revenue. As Andrew and I have already commented, we are confident in achieving our internal 2023 top-line target, and we see a similar revenue seasonality as in 2022 with heavy sales at the end of the year. The Bytosh group is today stronger and more robust than ever, with a gross cash balance of 501 million SEK and a net cash of 250 million SEK. The amazing Bytosh team are daily working hard to diligently serve our customers and to make Bytosh the leading life science and diagnostic tools company. We're now looking forward to end 2023 in a successful way. So thanks a lot for your participation and for all your questions.