Biotage AB (publ)

to this webinar on our Q1 results. We will start with just a few slides on who we are, and then we will try to put a little more flavor to the executive summary that we have, and then Andrew will drive us through the financial update, and then hopefully lots of questions afterwards. So let's get rolling. I think you have seen this slide before, but it's always good to repeat what kind of a company are we? Because as we also have addressed in our Q1 report, not the least the CEO words that we have tried to simplify our strategies going forward, being more clear on that we are the global go-to separations company. And as you also know that we do have quite a lot of products that covers workflow solutions for our customers. That includes instrumentation, consumables and services. And as you can see in the middle of the slide that we are covering more or less all of the stages there is in a drug discovery. So we can facilitate most types of customers. And of course, to the right of the slide, you see all the modalities that we are having in our pipeline and our product portfolio. So I think we are pretty well equipped for also seeing some interesting growth going forward, which brings me to the next slide Just as an executive summary, as you all have seen this morning, we came out with a top line of 480 million SEC at 33% gross over last year with a very impressive gross margin of 63.1 and an uptake of 2.2% and that we are also pretty good in converting our sales to cash. As you can see that we have converted 171 million SEK and having an adjusted EBITDA of 126 million SEK. As I also wanted to allude to before we get to Andrew's There has been a tremendous growth in our recurring revenue that is now up at 72%. Some of you know that in the old days we were fighting to get to this percent and we have now moved from 67% out of the 2023 and now are 72%. And of course that has to do with the Estrella business that has grown with 78% over the last Q1 in 23. And as you also can see that now, our advanced therapeutics and biologics is now covering 30% of our business. So a very, very, very good going forward. There's one caveat that we are not happy with. also mentioned in the report, that was that we didn't succeed in getting the co-biotypes to a zero level or, as we said last time, a small increase. And you also know the reason. And in a positive way, we say there is a tremendous demand in the peptide business. And we were not able to fulfill that demand. Have we had the opportunity to do that? we would have had a very good single digit growth even into the core business.

We're working on it.

We are increasing the capacity going forward, and we are still seeing a tremendous growth in the peptide area. We are continuing to invest both in manufacturing facilities, but also in our R&D capabilities around the globe. So with that, I think I have, there's one slide more, which I want to just allude to, just to give you a flavor of that. It's not just our current business. We are also launching new products and you can see the Furobeats. And one of the things we are also constantly having in our mindset is that we need to continue to be Developing products that can be sustainable. And that we are trying to take out. Let's say if all the solvents we can and it goes for both both sides of the slides and that we also bringing more products into the PFAS area going forward and hopefully we will see slides also in the next. that are also having some instrumentation out on the field as new products. And by that, I hand over the word to Andrew.

Thank you, Torben. The business had, as Torben just mentioned, had a good start to the year with a solid Q1 performance. We returned to positive organic growth in our key markets in the Americas and Lima, We deliver strong recurring revenues of 72% in the quarter. It's worth just pointing out that Biotarge is built on sound fundamental foundations. Our business focused on the traditional small molecule market delivers predictable revenue streams, industry-leading gross margins, and solid underlying EBITDA and cash generation. Our biologics and advanced therapeutics business, which incorporates Astraea, gives us access to the higher growth by pharmaceuticals market and the ability to generate superior revenue growth and attractive margins. And as you just heard, our biologics business in Q1 accounted for 30% of our total revenue compared to just 4% in Q1 23. Coupled with our expansive modality offering and expertise, a further strength of biotage is its balanced geographical profile with strong positions in the Americas and EMA markets and attractive plays in selective key Asian markets that offer powerful medium-term growth opportunities. As you just heard, in the quarter, we delivered revenues of 480 million, up 33%, gross margins of 63.1%, up 2.2 percentage points, and underlying EBITDA at 126 million, up 28%. We saw very encouraging double digit growth in EMA and smaller positive growth in the Americas. But on the flip side, we saw strong in China still. We've seen a recent marked acceleration in customer demand for equipment targeted to the peptide market, which we have been unable to keep fully pace with in the first quarter. We're actively working with our supply partner to ensure additional production capacity is available so that delivery can take place and acquire volumes in the coming quarters. Had it not been for this issue, we would have been able to report some quite nice positive organic growth rather than the small negative organic growth of 1.4% reported. Just a few words on Astraea. In Q1, Astraea delivered 129 million in revenue and a growth margin of 64.8%. Compared to Q1 2023, revenue grew by 78%. Just to reiterate what I've previously commented, Astraea is a growing business and not at a stage where it neatly fits into a stable, uniform quarter format like our small molecules business. Of course, we're very pleased with our Q1 growth, you cannot take that q1 growth and assume it applies uniformly to the following quarters it is still lump but what we can say is that we are on course to deliver very pleasing growth year on year with current market forecasts appropriately reflecting this a small molecule in the quarter we saw growth in biologics and advanced therapeutics analytical testing and water and environmental testing. A small molecule business saw declines driven by suppressed business activity, with APAC heavily impacting this. Our scale-up and diagnostic businesses, which together represents less than 10% of our business, also declined in Q1. With scale-up, the decline was driven by the comparative, with Q1 23 containing the last remnants of COVID-related business in China. With the diagnostics business, we're again up against some very strong comparators with a very large customer order delivered in Q123. Order intake in both our scale-up and diagnostics businesses is more lumpy. Therefore, you have to focus more on the medium-term trend rather than a particular quarter. Constant exchange rates, excluding Australia, our EMA business delivered solid organic revenue growth in the quarter of 10%. America's business delivered growth of 2%, while our APAC business saw a negative growth of 17% in Q1, driven by China. Excluding China, our APAC revenue in Q1 was consistent with the prior year. Needless to say, we're actively looking at all our businesses on a routine basis to ensure that we are right-sized to ensure continued prosperity. FX headwinds in Q124 held back our organic growth by approximately 5 million sec, or 1%. If we look at our total group business, including Estrella, our EMA and American markets accounted for 83% of our total business compared to 72% last year, with APAC accounting for the further 17% or 28% last year. Our recurring revenues were very strong, 346 million, representing 72% of our total revenue compared to 59% last year, with our non-recurring revenues making up the balance of 134% or 28 million compared to 41% last year. Our recurring revenues give us more predictability in our results. A guiding principle is always to put the customer first and so to concentrate on forming long-term partnerships with them to solve their problems, improve their workflows and efficiency, and create additional volume. In Q1, we delivered an adjusted EBITDA of 126 million, 28% above Q1 last year. In the quarter, we also took approximately 8 million in charges relating to the CEO transition, and as these are a one-off in nature, they've been excluded in deriving the adjusted EBITDA total. We delivered a very strong adjusted cash flow from operations of 171 million SEC, 103 million above the prior year. We finished the quarter with gross cash of 683 million SEC and net cash of 426 million SEC. Also during the quarter, we continue to invest in R&D to be at the forefront of innovation leadership in our markets. We have an attractive R&D pipeline that will power our future growth. As you've just seen from Torben, we continue to launch exciting new products in the quarter, and we're particularly excited about AstraeoAdept, our novel nanofiber technology platform that addresses the challenges of purifying large and fragile modalities in the fast-growing cell and gene therapy markets. So in summary, Biotage has a strong market position with an enviable broad suite of critical must-have solutions in our key markets of drug discovery and development through to diagnostics and analytical testing. We have a clear strategic vision and are resolutely focused on executing on our plans to deliver superior growth at attractive margins. And just a final reminder to everyone that Biotage will be holding a capital markets day on Thursday, 23rd of May in Cambridge. And we would very much like to see as many people there as we can, so we can outline how Biotage is evolving and explaining in more detail exciting technology and growth plans. Back to you Torben.

Now as you have heard so now we are facilitating that we can get some questions and I want to iterate what Andrew just said that we would absolutely encourage as many as of you that come to Cambridge and first of all have a presentation of other managers in my team and of course even more see the site in Cambridge where you will see some of the fantastic new products we are trying to develop. So by that we will open for questions.

If you wish to ask a question, please dial pound key 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key 6 on your telephone keypad. The next question comes from Ludvig Lundgren from Nordia. Please go ahead.

Yes, good afternoon Torben and Andrew. Thank you for taking my question. First of all, given the Estrella growth here, you stated that it's 78% year-over-year growth, and when I tried to back out some type of seasonality for last year, I get that it was a sequential increase throughout the year. Maybe this is more related to the scale-up of the business than the seasonality, but can we expect some type of similar seasonality for this year?

Hi, what we obviously, we don't, we're not giving guidance on, um, kind of the quarter by quarter performance of Australia. It's, um, you know, we're happy with Q1 performance and yes, it was a lot better than Q1 23. Um, you know, we're very happy. We've got a growing business and, you know, will that growth be a nice linear upward line? Probably not. I mean, life, I suppose is never like that anyway. There will be lumpiness in the revenues in the quarter, but we have got a nicely strong growing business. And of course, as our business grows and develops and matures, we'll start to see a more normal phasing pattern, but we're still in that process or in that stage of understanding what is that normalized phasing of the business. Therefore, I wouldn't necessarily read too much into a quarter-by-quarter performance. Keep your eye on the bigger picture, on the yearly growth of Australia.

Okay, thank you. That's very helpful. And then also maybe focus on the small molecules business here. It was a continued decline year over year. But maybe if you could dig in a bit into the dynamics throughout the quarter, like how was, for example, the exit rate out of Q1? Was it stronger than the start and so forth?

You can say that, first of all, I think it's not... bad to get as close as 1.4% negative growth. We would have liked to be on top of it. There are differentiations in where is it that the growth is because if you look at some of the areas around it, then there is areas where it still grows. We could see also that the peptide business is booming. And it's not just from one area. It's all three regions that there are booming incoming orders and requests going there. The analytical business is also coming back after, let's say, the COVID times. So we see a really nice uptake. It is, as Andrew said, we are really having not only a headwind, a headstorm, in China, and I would also say we are not, as I maybe have said before, trying to see some light in the tunnel for China in the coming quarter. I don't think we will see that either. It is extremely tough there. I would say Japan, Korea is in reasonably good shape, and we have seen some encouraging let's say orders coming in in recent times. So it's still tough out there and people are keeping tight on their money, but we are seeing progression. We are also hoping to see that the downturn we have seen in China is going to be less over the quarters coming, but it will still be very, very tough times over there.

Right, I got it. So then maybe you mentioned the peptides. So with this increase in demand and you were not even able to deliver on all of the demand, if I understand correctly, do you think this is a new trend that will be sustained throughout the year or is this just a temporal thing?

No, I don't think that it is just a one year situation. We strongly believe that the demand will stay pretty good for the coming years. So our, let's say, focus is to secure that we get much more manufacturing capabilities. And to that end, I can say I visited our supplier a couple of weeks ago just to make him very well aware of what our demands are. The positive thing I saw was that there were two new machines there that are up and running already, and we can expect to see progress in being able to deliver more in Q2 and forward. We still have work to do to get up to the level where we want to be, because it is more than double of what the capacity was a quarter ago. So I would say no, we don't see it as a one-year lump up. It's hopefully going to continue and that's what we are seeing.

Okay, thank you. That's all for me. Thanks very much for taking my questions.

Thank you.

The next question comes from Simon Larsson from Danske Bank. Please go ahead.

A few questions, please, from my side as well. Continuing a bit on the peptide purification business, how much do you estimate that you lost or maybe, let's say, pushed out in the peptide business here in Q1? Torben, you said a very good single-digit growth. Hadn't you sort of missed on the deliveries? Are we talking more than 20 million sec here that you pushed out, so to speak, or what? Can you give us something?

We want to give you a number of 35 million sec.

Yeah, okay.

We, you know, translate that we would have been reporting an 8% organic growth.

Yeah, that's very impressive. Okay. Thank you a lot for that. And I mean, I didn't quite catch what Torben said here to the final question before me, but do you expect to start to deliver on that already here in Q2? Or will that take some time?

It will take more than Q2 to get to that level, because as you can understand, with 36 million, and let me also say, new orders are already bouncing in for Q2. So we will not be able to clean everything in Q2, but we will deliver more than we have done in Q1. On a good day, I hope that we will get closer after Q3. But there needs to be done more than just having two new machines. So they need to increase their capabilities in manufacturing going forward. And that's why we have a dialogue with them ongoing as we speak.

Okay. Yeah. That makes sense. Makes sense. i mean the weakness in instrument sales could it give any more uh insight to that i mean is it primarily due to weak chinese cro cdmo market for small molecules like flash chromatography systems or is it something else that is that's dragging here i would say that it is predominantly the flash purification and of course china is the major let's say

place where it has gone down. As you can see what Andrew said, we have a growth in EMEA of 10%, so the business is going quite well there. We are also having growth in the US, not as nice as in EMEA, but there are growths. It is, I must say, it is extremely tough out of China. Of course, The comparison numbers going forward are going to be better, but we are more looking into the nominal business. And that is tough.

Yeah. And the final question from my side. So I noticed roughly 30 people less employed in Q1 versus Q4. So you obviously sacked a few people here during the quarter. Should we expect this to show in the P&L going forward in any way?

No, I don't know. It's just a general trend of joiners and leavers. So, yeah, we've not been, you know, businesses, not in any kind of, so it's just a normal trending pattern. So I wouldn't read too much into that, too much into quarter numbers.

Okay. Yeah. Okay. Makes sense. Thanks a lot, guys.

The next question comes from Carl Noren from SEB.

please go ahead yes hello some questions from myself as well if we start on the analytical testing side which I think was very strong this quarter quite a pick up from recent quarters to this mention anything specifically what drove this growth and a new customer signed or a new contract going on I would say that it is

getting the business back we had before COVID. Let's say CEOs in the big lab core quest, they are getting back to normality of having tests of many, many other samples than just for COVID. I wouldn't say that there are any one big ticket that has come into play that we haven't had before. So it is just normalizing the business, getting back to where we were before the COVID.

Okay, sounds good.

One thing about further call on that is that the analytical testing is a great, it's a great sticky business and a great high recurring revenue. So, you know, you're applying consumables into Quest and LabCorp and all the, you know, so it's a great high recurring revenue business for us.

Yeah, exactly. That was why I was a bit surprised on the uptick here in the first quarter, but it sounds good if it's sticky. Another question here, more negative tilted one maybe on ACBio, which is down 43% year over year. Could you comment anything on what's going on in that business?

Yeah, I think that that is just to say it is lumpy, it's a lumpy business, it depends, it's order intake, you know, we can, you know, we're comparing against a very high quarter one 2023. So I think what we've got to do with with the diagnostics, as well as the, you know, the starter businesses is, is really kind of look at more of a trend rather than a particular quarter, because particular quarters is dependent on kind of order intake and being able to recognize revenue. So let's, let's give those, let's give those businesses a few quarters to see kind of real trends rather than necessarily get worried or not by just one particular quarter.

Okay. And then yes, the question on a street as well. I don't know if you answered it before, but I mean, it's backed out there. The Q2 numbers last year from Australia, it seems to be around 84 million. Uh,

and on the seasonality side in austria is q1 and q2 usually similar sales levels or do they differ a lot um it's again we we we um you know we we we've got to see more trends to to to give you that maybe kind of if we here next next year this time we can probably start giving you more reliable, because we'll have more reliable commentary, so we'll have more of a history of what the normalized trends and phasing of Estrella are. Obviously, it's a growing business. It's getting new customers. We just need to see how that's developing and how the customers are giving orders. Don't forget, I think others have commented, Danaher and so on, about gradual return of customers and coming back so you know we we still think as we said um previously that it's going to be more more weighted to h2 than h1 and and we feel comfortable with our kind of total yearly target but you know it's going to be just a question we're surprised by the 78 percent growth in australia here in q1 It's nice. I'm not going to run the country back on whether we're nice. We were happy with it.

Yeah. And if I may, one on small molecules as well. I mean, sales down to the lowest level in quite a while. And I understand that China is much behind it, but I also know it's America's.

down a little bit uh so i was wondering do you feel like a run rate around 140 million in sales per quarter is that roughly where it should should be or is the potential to increase there going going forward i would say the following we would absolutely like to see that the trend is growing and we know that there is a lot of work to get that going there are also pockets of areas where we absolutely can grow going forward. And we, of course, also, let's say, working with getting some more products out. So, we are still developing products in the area of small molecules, our instrumentation platform. Hopefully, within another two-distance future, you will see some news coming out on that area. Would we like to see a better baseline? Absolutely. And we are working on it.

Good. Sounds promising. See you in Cambridge then, Torben and Andrew.

Yeah, looking forward to it.

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

Yeah, good afternoon. Mattias Ekman, Handelsbanken. So two questions, please. Firstly, while you've said a lot about what Austria did in the quarter compared with last year, why you can't say how you feel about Q2 yet, but maybe a year from now, we know more about seasonality. Is there anything you can say in terms of customer concentration or the opposite diversification for Austria in the quarter? Anything that changed during this quarter compared to, for instance, Q4?

No, I don't think there's anything materially different about the Australia business in Q1. Obviously, you know, our whole commercial strategy is to expand that customer base and drive further diversification. But, you know, that is more the medium term thing rather than just an immediate quarter issue. So, you know, it is a similar business to what we saw last year.

But I would like to say also, Andrew alluded to, we are increasing the customer base water by quarter. And by that gives us better opportunities going forward to have a better view. We it's not that, of course, we never give you any prognosis, but we are still on a learning curve also to see how the seasonality is. But of course, it's getting The better and better, the more customers we get and the more orders of some significance we can get from these customers. But it is still, we are really looking at this business on a yearly base to see if we are satisfied with the growth that we are thinking we will get.

That's clear. Anything you can say about book-to-build for us, Treja? Or is that not a useful term for us?

I think, Mattias, it's probably to where that business is too early in its growth trajectory to use book-to-build. But book-to-build is a good ratio for kind of stable, established businesses. I think it would just be a fairly meaningless number right now.

Got you. And then finally, ahead of the Capital Markets Day here coming up in May, what in particular is the ambition to get across to the investor community joining on site? I mean, what in your view remains a gap in terms of perception to better understand Biotage? Any commentary that would help me frame the expectations that would be appreciated?

Well, I can go first. I think, yeah, I think what... What we wanted, you know, obviously to have it in Cambridge is for people to get more of understanding of Astraea, you know, kind of actually see it, see it physically, hold products, hear from, you know, our great leadership in Astraea about, you know, the kind of the exceptional growth journey they're on and what products and technology they have. but also kind of in a wider biotage, you know, how our business is evolving, how we're positioning our business to kind of win in the markets. So, you know, it's kind of, you know, a holistic view, but obviously, you know, in Cambridge, with more of an emphasis on our biologics business.

And I would add to that, it's also to get exposure to other parts of my management team that you don't have to listen to Andrew and me all the time. Get also some of the people that are doing the job in the machine room every single day that they have a chance to meet with you guys. And so they will be more exposed than anyone else in that setting. And of course, as Andrew said, to look at what we believe is a very, very bright future for technology that is not even out there yet, really. It's just at a testing phase. And therefore, we took the decision to go to UK.

Perfect. That's all for me. Thanks so much.

The next question comes from Odysseus Manisiotis from Burenburg. Please go ahead.

Hi, thanks for taking my questions. One for Andrew first. So, Andrew, you said that current market forecasts were in line with your expectations for Austria. I just wanted to make sure what you're referring to. Is this the sort of consensus which has astrea or your biomolecules business at 650 to 700 uh million sex in a year or is it more more like your targets uh which imply an annual sort of 30 sales category i need to hear yeah we don't know we don't kind of obviously provide guidance obviously we do look at we do look at um kind of the reports that come out and you know it for me i can't whether i kind of fall off my chair or not i'm not

Um, so, you know, I, we think the, um, the, the current, um, values that people have penciled in kind of probably chime with kind of our, our kind of views of the business. Obviously what I don't to do is kind of get people to say, yeah, Australia had a 78% growth in Q1. Wow. That's so if I start doing the numbers, you know, we get to a, a crazy number. So it's, it's providing some bookends. So people can, you know, yes, we've got a good growing business, but let's not get too carried away at this early stage. So that's kind of what I wanted to kind of get across there.

Understood. And could you share a bit more detail on China just to help us model here? So what was it as a percentage of your sales or an absolute number in Q1 and what was it in full year 23?

I think what we can say in a more broad setting is at a certain stage, China was covering 15% of biotarsis business. Now we are below 5%. And with all of the political games that are going on in the world right now, would I like to see China a little bit better? Yes. Do I want to see them at 15%? no way do i want that because that's too scary so there is good and bad things about it because we're still growing the business and china plays a smaller and smaller role and it it's a it's a strong situation to be in with respect to we need to of course look at how is our structure in china going forward because if this continues that, for instance, US is abandoning any business more or less with some of the big CROs there, then as you know, they have been our primary customers over the last couple of years. But you just have a bit of a framework. We've gone from 15% down to below 5% today.

Understood. Very clear. Thanks, Torben. And thirdly, so could you be a bit more specific on the pep side benefit here? I understand you launched ExtraHero, your new ExtraHero, and you also announced a big partnership at the end of last year that probably helped. What I'm trying to understand, was this a mainly product launch dependent growth or was there anything

market-wide that benefit to do here is it is the glp-1 situation uh telling to you let me say the following first of all we have what we think a pretty unique situation helping our customers with their workflow of synthesizing purifying and evaporating their products and in the front end of the synthesis The SIRO instrument is a parallel synthesis that can make 96 peptides at a time. That's very helpful in the customers building libraries. So that's what it is. We haven't right now added some very specific new products to the pipeline. It's just that we are having a good solution for the customers that needs to manufacture quite a lot of pit sites.

Understood. And last one for me, on the order front, I understand you don't share details here, but could you at least tell us from a sequential perspective, did either orders on an absolute basis grow from Q4 to Q1?

I think in the core business, it's It's a pretty similar, you know, small molecules. You know, the order intake is pretty consistent. You know, if you look at our small molecule business, it's a nice, relatively stable business, even with, you know, that kind of one of the strengths. You know, we suffered, obviously, a big fall in China, but had a growth in NEMA in America. So they're kind of counteracting each other, which is kind of a nice position to be in.

And it's also one thing that you have to remember. How is the outlook for, let's say, the internal people to make prognosis and forecast? When you are in the small molecule area, you sometimes don't have 45 days outlook because you don't get them to commit to anything. And right now also, It is always in the last minute. OK, now we got the order. I would say we have seen some positive trends in some areas. And of course, we're still seeing, as we have now alluded to quite a few times in this call, that China is not starting to take off in any major ways. But there are pockets in other areas that are seeing some interesting growth in also orders and backlog and quotes.

Thank you very much. That's perfect to hear. See you in Cambridge.

Cheers. Cheers.

As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.

First of all, thanks for participating, listening, and also your questions. And let me reiterate, I hope to see as many of you in Cambridge in a month's time. It will be fun. And we really have something to show you. So get over there and thanks for