Biotage AB (publ)

Good morning, good afternoon, good evening, depending which part of the world you're joining us. It's my pleasure today to introduce our entering report, Q4 and 40 years 2024. Joining me today is our CFO, Andrew Kellett. On the agenda today, I will briefly introduce our vision and missions. Then I will turn it over to Andrew to give a deep dive on our Q4 and 40 years highlights. I'll cover as well our strategic priorities, and Andrew will finalize it with the financials updates. Next slide, please. Our mission statement of empowering our customers to simplify and accelerate discovery and development is defining on how we drive our long-term growth and industry leadership. This is how we create value to our customers and shareholders. As we reflect on our Q4 2024 results and subsequently on our 2025 priorities, we are staying true to our vision and mission. Despite increased volatility and macroeconomics challenges affecting the sector, BioTech is very pleased to report a 10.5% growth in revenue during 2024. We have seen a slightly improved growth margin, reaching 62.7%. Adjusted cash from operations increased 33% year-over-year, equivalent to 106% of our adjusted EBITDA. In summary, these results show that our product and services remain in high demand and that we can face both current and future headwinds in the sectors without deviating from our long-term strategy. I'm particularly pleased by the performance of our core business that is now reporting sequential quarter-over-quarter growth and excluding China, is resuming back to mid-single-digit growth. As we've seen in quarter four, our business can be quite volatile on a quarter-by-quarter view. Our revenue is derived by our customers' base that use our product in productions. While our long-term growth is defined by how many new customers we get specified in clinical phase two, our short-term revenue is defined by those customers in production mode. We remain true to our long-term growth strategies, and we are pleased to report that we continue expanding our customers' base in clinical phase two. But we also have to balance this with our short-term imperative. As such, our 2025 priorities will be to further integrate the Astra businesses to realize full revenue and cost, as well as knowledge synergies between the two businesses. We have put new leadership in place to execute the strategy execution and derive the cost savings initiative that we have defined. We will remain true to our executing our long-term vision for the Astra business, which aims to develop new solutions to address customers' needs in partly expanding our service offering in column packing and binding ligands to our beads. Astra will continue to be volatile through 2025. We are completing our strategic review of Oligo businesses, which we have defined as not being part of our future strategic focus for the company. Through the year of 2025, we will continue deriving discipline operational executions, pivoting to profitability and cash maximizations, streamlining our cost structures and deriving operational excellence across the business. We will continue focusing on high growth drivers and enabler, accelerating our application development and executing our new product launches. As such, we will increase market penetration in the attractive peptides and purifications market. We continue remaining committed to our three years revenue plan and profitability targets. I'm now turning over to Andrew to give you a deep dive on our financial results.

Thank you, Fred. Good morning, everybody. The Q4 report, along with the presentation available on the BITARGE website under the investor section, and then financial reports. As Fred has just indicated, the business had a solid Q4 performance and continued momentum for the full year. Revenues for the first time exceeded 2 billion and grew by 10.5% on prior year. We also grew gross margins, underlying EBITDA, and underlying cash from operations in the year. For the full year, our core biotage business grew revenues 1.3% excluding China and narrowed the decline to just minus 1.9% including China. China continues to be a smaller part of our total business, below 5%. At Astraea, full-year revenues grew 23%, and our full-year recurring revenues remained strong at 72%. In drug discovery and development, we delivered full-year revenues of 1.46 billion, up 11%, and this accounted for 71% of our total revenues. In analytical testing, we delivered full-year revenues of 596 million, up 9%, and this accounted for 29% of our total revenues. In the fourth quarter, we saw similar trends to what we've seen throughout the year, with gradual momentum building in our key Western markets and continued headwinds in China. Total revenues in Q4 were $582 million, down 9.5%, reflecting the very high weighting of Australia revenue in Q4-23. Highlights in Q4 include the sequential quarter-on-quarter growth in the core biotage business of 6%, small molecules backing growth at 2%, and growth in systems revenue of 3%, with Q4 systems revenue the highest quarter since Q4-2022. Large molecules declined in the quarter, as expected, attributed to the strong comparable period, although they were still very strong at 220 million. Our gross margins for the full year were 62.7% at one percentage point, with Q4 margins 61.8% at 0.7%. Estrella had a very strong margin performance, delivering 71% in Q4, up 10 points, and 66.7% for the full year, up 5 points. The core biotage business delivered full year margins of 61% and Q4 margins of just under 57%. In Q4, in our core biotage business, margins were impacted by the softness in the oligo service business, which had a negative impact of approximately 1.8 points. Some provisions on a small number of specific inventory items with an impact of 1.5 points, a mix which had a negative impact of 2 points. FX had a positive impact of 0.4 points. Q4 mix was impacted by both higher system sales and the composition of specific product sales. Broadly, systems deliver margins at high 50s, early 60s percent, whereas recurring revenues deliver margins in the high 60s, early 70s percent, depending on the type of product sold in a particular period. For the full year, the oligoservice business had a negative impact on the existing biotage margins of approximately 0.6 points. FX had a negative impact of 0.5 points, and MIX had a positive impact of 0.4 points. Excluding the oligoservice business, margins were comparable year on year. We are now in the process of a strategic review of our oligoservice business and will report when we have concluded this. In Q4, we delivered an adjusted EBITDA of 167 million and for the full year, 547 million, up 6%. In the quarter, we delivered adjusted cash flow from operations of 181 million and for the full year, 579 million, up 33%. clearly demonstrating our ability to successfully convert profits into physical cash. We finished the year with gross cash of £434 million and net cash of £184 million. In the year, we funded acquisition earn-out payments of £287 million, a dividend of £128 million and investments in tangible and intangible assets of £169 million for future growth. So to conclude, we've delivered a good full year performance, delivering revenue, margin, EBITDA and cash flow growth, despite the market headwinds we have faced. As we look at 2025, we will have a disciplined approach into the operational execution of our strategic priorities. We will pivot to profitability and cash maximization, streamlining our cost structure and driving operational excellence throughout the business. We plan to further integrate Australia to enable us to fully realise the long-term revenue, cost and knowledge synergies. This will incur estimated one-off integration costs of approximately 25 to 30 million in 2025. With the leadership changes in the commercial teams that have already occurred and future ones we are making in Australia, we are likely to see much more revenue volatility in 2025. As we enter 2025 with an Australia backlog down on what we entered 2024. And as that backlog typically gets converted in H1, we can expect this to have a corresponding impact on reported revenue. Despite the short-term volatility, we still believe we will deliver on our long-term vision for the business. We're also focused on high-growth drivers and enablers, accelerating application development and execution of new product launches, and increasing our market penetration in the attractive peptide purification market. Above all, we remain committed to our three-year revenue and profitability goals. I think we're now... Happy to take 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 Mathias Hegblom from Handelsbanken. Please go ahead.

Thanks so much. Good morning. Thanks for taking my questions. I have two questions, please. So first on Astria, you had a monster Q1 last year with sales up 78%, and you speak about the quarterly volatility for Astria in 2025 and the backlog down by the end of the year compared to the year before. which I guess speaks to some of those challenging comps. I'm more interested to hear how we should think about 2025 as a year as a whole for Austria. I don't know what consensus models for Austria in 2025. We carry 15% growth for the year. Anything you can say to help us frame fair expectations for Austria for the year would be helpful. And then secondly, also Austria, you've now been in place As a CEO for five years roughly, and there's been some departures within the AssetSphere team, you speak in your CEO statement about a relatively young organization. I think I heard you talk about a new leadership team in place. So any additional color on those organizational changes would be helpful. Thanks so much.

Yeah, Matthias, thank you for the question. This is Frederic. I'm going to answer your questions. First, we don't provide a full-year guidance. We provide a long-term guidance for the business. And as Andrew and I have stated early on, it does remain intact. Our commercial organizations today is focusing on expanding our customer base in clinical phase two. We recognize that this has limited impact on the short-term revenue, but it's fundamental to a long-term growth trajectory. as those customers who are evolving and when we are seeing those in clinical phase two, the product gets specified and will later on evolve through clinical phase three and subsequently in production. To give you a perspective, when we see customers in early stage discovery, we enjoy a revenue in the $10,000 to $15,000 a year. And as those customers evolve subsequently in scaling up, we can increase that by a tenfold. But that doesn't offset a customer that is in production which generates millions of dollars on columns business. So I think this is where we have to balance or short-term imperative a long-term strategy. As I said early on, we remain intact to a long-term strategic objectives because our customers base as we are seeding is constantly expanding on a year-over-year basis. So we are penetrating more molecules, more workflows as we speak. uh considering the the management changes uh as i pivoting to uh further integrating uh the structures and and and we have come to the conclusion that it was time for us to change leadership there uh subsequently some of the commercial leaders have also uh decided to to uh to pursue a new endeavor outside of of biotage That has little impact on your short-term revenue. And as we rebuild an organization with new capabilities and fresh expertise, we believe that the team will be capable to continue executing on the long-term imperatives that we set for the business. So we don't expect these management changes having an impact into the business on the short-term level.

Two quick follow-ups, if I may. So, firstly, on the long-term prospects for us three of them being intact, could you remind me what those are? Are those the same as for the group, or are they specific? I'm not sure exactly I fully get that. I want to make sure I fully understand what you referenced there. And then, secondly, in terms of the leadership and the new leadership, so is that now run from centrally, from BioTosh, or do you have a new team in place at the CEO perhaps both.

So I'll take up the second question. So I think we are, I think through last years, we have started to bridge between the two businesses. So I think the chief scientific officers from Astra is now a broader role and is overseeing the two businesses from a technology and scientific standpoint. Andrew was the former CFO from Astra is also oversees responsibilities for the whole business. We'll continue driving synergies and cost synergies by leveraging the back office activities and senior leadership activities across the two businesses. When it comes to the commercial organization, the business model is still fundamentally different in terms of revenue generations and activities. So we remain focused with a commercial team that is dedicated to Astraea businesses. The size of our business, though, does not need to have a dedicated general management or CEO for the Astra business. So I think from that perspective, we don't intend to replace the general management CEO type of function that we inherited from the acquisition of Astra at the time. When it comes to our long-term objective, it is about seeding customers in early stage discovery. And as such, when one of those customers goes into production, then we can enjoy the long-term revenue in several million. So while we cannot predict if and when a customer that we seeded in clinical phase two will get into a production mode, I think the model relies upon us seeding as many of those molecules as possible. Last year, we were fortunate to have one customer that evolved into production that started to generate revenue for us. And we hope and trust that by seeding as many molecules, we get more customers moving sooner into production mode.

Thanks so much.

The next question comes from Ludvig Lundgren from Nordia. Please go ahead.

Yes. Hi, Fredrik and Andrew. So continuing a bit on Astraea, comparing to last year, you have really changed the geographical sales split with about half of it coming from Americas now. Can you comment a bit on what has been driving this shift?

Yeah, I mean, I think this is kind of one of the commercial strategy in action. As we work with our customers and they're bringing their products into production, that can obviously have quite a significant impact. in the amount of product we're selling them. So what we've seen in the growth in the States is one of our customers is moving one of their products as now has got into production and that's much commercialization. And therefore you can see a rapid swing up in the level of demand for the product.

So Ludwig, if I can chime in as well, I think it's well known that the most dynamic market when it comes to innovation in the large market space is the US market. So I think our efforts about seeding customers in clinical phase two is primarily driven towards that market. We cannot predict ultimately if and when the manufacturing will end up into U.S. or Europe or if the customer is going to produce the molecule themselves or go through CDMO or CMO for production. So I think our revenue recognition is dictated by the ship-to addresses. But as Andrew indicated, last year, one of our customers decided to produce into the U.S., and that is when it's driven or shortened revenue.

Okay, very clear. And then you've previously highlighted that the three largest Estrella accounts make up a significant share of sales. So are these three accounts still active and how do you view the growth potential from these in 2025?

Yeah, I think we haven't lost any single customers. They are all active. You know that all product is specified into the downstream processing, and as such, the process defines the product, and we haven't seen neither loss in market share. Our customers are having a very, I would describe it as interesting molecules. What we reported early on, one of our customers in the plasma business is resuming back to normal growth rate, which is one of the drivers for business onwards. The other one that we are creating are more on the non-plasma business, which is recombinant proteins, and that ones remain solid from an overall point of view. So I would say we haven't lost the single customers, the customers, the plasma demand resumed to normal for us and the non-plasma business remain intact from a normal point of view.

Okay, understood. So then kind of a follow up. So in Europe, then the business was significantly lower in Q4 24 compared to last year. Could you say anything about the underlying drivers for this? I believe Plasma has been somewhat weaker here in Q4 and also then how you view the European market then into 2025.

Yeah, I mean, yes, I mean, clearly the plasma demand, I mean, I would say the plasma demand was low. It was just it was just phased differently. So the, you know, rather than in 2023, that plasma demand was was very back end loaded. In 2024, it was much more in a way front end loaded into the first three quarters of rather than the fourth quarter that's why you've got that big disparity kind of quarter on quarter but when you look at the kind of the year you'll get a more um you know kind of considered view okay and like is there any reason why

The total amount of sales in 25, so to say, will be lower than 24 for plasma. I believe the inventories now are more in stable levels. So it's a similar level, so to say, from that end market, fair to assume, for 25.

Again, we don't comment on the outlook. We are responding to demand of our customers. And as Andrew indicated, we entered the year with a sizable backlog in 2024 that basically increased our demand and our revenue in 2024. We are entering 2025 with not such a strong backlog. So that's certainly going to have an impact on our revenue outlook for the plasma business.

Okay.

Where's the final one?

It's worth just kind of commenting that, you know, kind of that plasma, we are not losing business to others. You know, that is a baked in biotage Australia product. So, you know, it is customary mandated. It's not as, you know, they're moving supplier. It is not. That is not the cause of any changes in orders. It is purely the customer.

Okay, great. And final one on small molecules. I believe sector peers have been somewhat optimistic about the market, like improving here in Q4 with like quite okay exit rates and some peers at least has been guiding for quite solid growth in 25. Could you comment anything about the market here, like the exit rate for the market at least in Q4?

Yeah, I think you've seen that 2024 was characterized for us on the small molecule by the China situation. I think we believe that China has come to a bottom here. We don't expect China to be a substantial growth driver, given the small impact it has on our business. But we also, and we have demonstrated in Q4, we have seen mid-single-digit growth resuming back into that space. So I think as we have new product coming to the market that will probably influence that small molecule sectors, I think we remain optimistic into that space as we think about 2025.

Okay. Thank you for taking my questions.

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

Yes, good morning. Can you hear me?

Yep.

Hi, Carl.

It's a question on the analytical testing side. I mean, now two weak quarters in a row with really no real growth. I think when I asked the question in Q3, you said it was more temporary, but now it's coming in a little bit weaker again. So could you just explain what is the driver of the weakness here? It seems to be related to the U.S.? ?

Yeah, I think the main driver of our electrical testing business is the US. And, you know, I wouldn't necessarily read a lot into it. You know, we've seen our business growing and we still think our electrical testing business is a solid growing business. So, yeah, I mean, I kind of... Again, I wouldn't read a lot into that. We certainly have a lot of confidence in it. And certainly, as we look into 2025, we think the drivers behind it are still solid and we still expect progress there.

Okay, so growth to be expected in that space going forward.

Yeah, I would add to what Andrew said. We are aiming to launch products in that segment to support the growth there. So I think that is what helps us to remain confident throughout 2025.

Yeah, that's good. And then on the small molecule side, I noticed that you started to quite a big step up sequentially and the growth year over year again reported at least. and I noticed that the system sales are quite much up here so I'm just wondering if that's related totally to the peptide system sales or are there other

segments also seeing growth there? I think our peptide systems have been strong. We have increased our output with our partners by 50% so 5-0. That has certainly helped us to clean a little bit of what we had as a backlog but the demand has remained very strong. We also have seen demand expanding across the different segments and not only specific to the peptides. So That's where I think we remain cautiously optimistic as well when it comes to the equipment. But our strategic focus is next to the equipment also to make sure we leverage our install is to overdrive consumable across the business, which is a key imperative to continue driving margin expansion.

Okay, that's all for me. Thank you.

The next question comes from Ludwig Lundgren from Nordea. Please go ahead.

Yes, just the final one, if I may. So just regarding NIH funding, we've seen a lot of rumors about this indirect cost limitation being implemented probably from the U.S. government. Like how much of an exposure does BioTosh have to these types of funding channels?

That's for our US business, Ludwig. It's kind of mid to low single digits. It's very small. So, you know, it's not, yeah, it would be a slight headache if it was curtailed. But we don't, you know, we've seen lots of reports that even in the first Trump administration, NIH funding actually increased significantly. so um you know if if it did cut off yes it was slight headache they say it's it's low to mid single digits um of our us business only so it's a relatively small amount okay thank you bye 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.

So I want to thank you. I want to say that we continue. executing flawlessly towards our operational execution focus this year and profitably as well as strong cash conversion for the year 2025 and that despite the volatility that we've seen in Australia we remain confident on our long-term algorithm for growth And we are confident into the path of our business. We don't believe that the management change will have an impact into our short-term revenue. And we are continuing to see all clinical phase 2 customers to drop. towards our long-term objectives. I want to thank you all for joining us today.