Biovica International AB (publ)

Hello, everyone, and welcome to our earnings call for the third quarter of our fiscal year. Today, it will be me and our CFO, Anders Morén, who will do the presentation. And the agenda will be first a short introduction about BioVika. We'll go through the highlights, then Anders will go through the financials, and then we'll end with a summary and a Q&A session. The Q&A session will be done this way that we will have Philip Lindqvist, our analyst from RedEye into the call asking questions, but you can also submit questions that will be answered in writing and appended to the presentation that will be put on our homepage after the call. So I'll start with Byvika and our product Divitum. Divitum measures what's the core of cancer, which is cell proliferation. And the way we do it is through a blood sample from the patient that is analyzed using our assay in our lab or in an external lab. And by doing so, you will get a precise understanding how the tumors are proliferating, which is an indication of how aggressive the disease is, which is of course is important when making treatment decisions. Also, it has proven to be an excellent tool for monitoring of treatments and to get feedback over time and get quick feedback earlier than with other methods like imaging. This has been proved in several clinical trials. We have more than 30 peer-reviewed articles and studies that have been performed with some of the leading oncologists in the business at some of the most well-renowned institutions, like Johns Hopkins, WashU, Mayo Clinic, etc. And the majority of these trials are within our first application, the breast cancer area, although there are potential also outside to expand into other large area where the Divitum can add benefits, both to patients being on treatment and as well as treating physicians and payers. because you will also be able to reduce waste for expensive treatments, which also benefits society. These clinical trials create a solid foundation for our commercial activities and our go-to-market process, and also create demands from pharma companies developing new therapies within this area that are using our product in that phase. As I said, the first application is in the breast cancer area, more specifically in the metastatic breast cancer, where we have our 510K clearance, and that we are active, especially so on the US market. We serve the market from our US CLIA lab, situated in San Diego, serving all the 50 states here in the US. Lately also, we have presented clinical data showing that we have a strong application also in early phases of breast cancer when monitoring so-called adjuvant treatment, a market which is significantly larger. We also developed a second version of the test, the so-called LDT that we can provide from our lab in San Diego within this space as well. There's potential here to expand into other areas and we see several mega trends that is playing to our advantage. One is that people are staying longer and longer on treatment and also on more expensive treatments with severe side effects. And you want, of course, to improve the precision of monitoring This is especially true for our two main focus areas, targeted treatment and also immuno-oncology treatments. Same thing with precision oncology, you want more and more precise treatments that have a more narrow target and also that drives the demand for more precise monitoring. And third trend would be pharma integration, that pharma is using biomarkers and biomarker tests more and more when they develop new therapies and the diagnostic product is very closely related to the new drug. Then that drives also demand for improved monitoring. You could also add a fourth trend, maybe, which is dose optimization, something that the FDA is pushing through their Project Optimus initiative. Uh, which, uh, has the, uh, focus to, uh, to not overdose, but to give enough to maintain efficacy. And of course you need them good efficacy by markers. So this all boils down to that. We are well positioned to meet these new trends and has as a unique product that measure what's really essential in cancer. And also have the ability to impact great values. Currently, according to IQ, we are more than $200 billion per year are spent on oncology treatments within this area. So there's also a potential not only to improve, to help patients with a better treatment outcome, but also to be more efficient when spending these large resources on cancer therapies. So if we move into our third quarter and the highlights for that, we start with the financials. Anders will go through these more in details. But if you compare year on year for the third quarter, we had a 40% growth. And it's even more if you compare it in local currency, that local currency would be dollars. The majority of our sales, more than 90%, is in dollars. So when the dollar currency is affected, you can see that in our top line as well. And if you look accumulated over the first three quarter, it's also still a strong improvement, also in local currency. One important KPI is our operating cash flow. We have been reducing this steadily during the last two years. If you compare versus same quarter last year, it's a significant reduction. If you compare for two years, I think we brought it down from 25, 30 millions per quarter now to 11.5, so that's a trend that we welcome, and that's an important KPI for us moving forward as well. Our cost position at the end of the quarter is 88 million Swedish kronor. If you look at the clinical area in the US and in Europe, we continue to sign commercial agreements with our target customer category, which is the NCI, NCSAN designated cancer centers. We announced that in December. We believe more and more we're getting traction on the US market, and it's focusing our resources. So that meant that we agreed jointly with our Nordic distributor to terminate the distribution agreement in the Nordics. The activities that we're currently doing in the Nordics, we can do ourselves also. Pharma services has had a great momentum now for quite some time. That is continuing, which we'll get into on a separate slide. When it comes to the clinical area, we are continuing to present new clinical studies, especially in these areas that are important to us. CDK force inhibitors, dose reduction and monitoring. And just this morning, we had a PR out that we will be presenting a study within immuno-oncology or ICI immune checkpoint inhibitors on the upcoming AACR conference. We also have initiated a CEO succession. And at the last slide, I'll give a little bit background and my thoughts around that. So in general, I think we're seeing momentum in both our areas. We see strong growth and we expect to continue to grow going forward. So if you look at the US highlights, if you compare it quarter by quarter, you see maybe not such a positive trend. And I will still want to claim that we overall see a strong growth. All quarters are not the same in our business, especially quarter three is a little bit of slow quarters with both Thanksgiving and then you have the Christmas and New Year's holiday. And if you add a storm in US last week in January, where all the samples from the East Coast had to be thrown away, Of course, you can have short-term impact, but I think if you break down the numbers, you can see that we've had a weak October due to what we communicated lastly, that we lost already from a clinical trial, which takes some time until we turn that around to clinical use. That was the commercial agreement we signed then in December. And we see the pickup. We still have such low, it's still a bit volatile, our business. So we'll get impacted of events like that. But since November, we see a steady trend that we are improving and also beginning our Q4 is better. And I would say that in general, we see a strong momentum in our US business as well. It's taken a bit longer to get to this point than expected, but more and more, we are seeing an increase in demand and also more spontaneous Accounts opening up from both patients and oncologists, getting knowledge about Divitum from already users that recommends and that is growing our business. We also seen actually patients choosing oncologists that can offer Divitum versus oncologists that are not offering Divitum. So yeah, we see an increased momentum and we're very pleased with that. And on top of that, we also have several initiatives that we are convinced that will further drive the growth. One thing is the large IDN that we have been talking about now for quite some time. We have completed the protocol. It's been a pretty intense period the last couple of months. We worked together with them to ensure that what we now write in the protocol, the way we design the trial, that we optimize for a successful outcome of the trial. So I think it's worth that extra time to make sure that it is a successful outcome. The next step is submission to IRB that will take place now very soon. And then if we can do that, we believe we can initiate the trial this summer. This has a great potential both during the actual trial, but also after the trial to unlock this large organization for a system wide adoption and also becoming a very strong reference case for others. The early breast cancer we also see that this is starting to happen more and more. We see, for instance, we have a center in Florida that has made a decision to expand usage into the the early breast cancer area for adjuvant monitoring and they will over certain time here they will increase patients from today's 20 to around 100 so that illustrates the impact that having earlier breast cancer expanding to that that one can have that also is done like an observational trial so we will get some important data because that's an area where we don't have as much data and it's essential to strengthen the clinical data in that area to further strengthen our value proposition. And Tempus completed their market research, which is preparation for our go-to-market work. And as communicated earlier, we expect to launch this together with them in the fall of 26. They have both a significant sales organization and also a very efficient process uh to target uh with the sophisticated it systems so this is a great opportunity to us to leverage uh yeah on a totally different scale sales organization to target the big community oncologists segment this morning we did a pr about the upcoming aacr we have two abstracts that will be presented as posters. One is personalized dosing in the CDK space, both the existing 4.6, but also next generation. This is an important area for us because this is an area that the FDA is pushing through their project Optimus. And I think we have a unique offering here. So it's very, very good that we also can prove that with data in more the trials that we have achieved so far. So very positive. Another area that's interesting for the future is the immuno-oncology area. Here's a collaboration with a few Italian institution and also here Divitum performs very well. And it's an area interesting for the future where we have ongoing patents and also now ongoing collaboration with both academia and pharma companies. Moving over to pharma, it's also one important area of our business. We're currently active in the left-hand phase of the process here, service and kit sales. We are working with the majority of companies developing next generation CDK inhibitors. And so we have a portfolio of around, yeah, I would say 20 plus now projects. And we see here that the volumes are increasing month by month. So it's very, very positive. And that we can add value here. Companies are coming back for the next project and the next project, and the business is growing over time as they're moving also forward from, we're involved already in preclinical phases until phase one, phase two, and going forward also phase three, hopefully. So a strong momentum in this business. The CDK area is an exciting area. It is currently an area with a $12 billion of yearly sales from three leading drugs. Pfizer, Novartis and Eli Lilly have their respective drugs in this area. The future market is expected to be even bigger with about five times the volume. And it's driven both by new drugs coming to the market and the expansion into the earlier phases of breast cancer for adjuvant treatment. And so we're well positioned here. We're working with the majority of the companies developing these new drugs. And we're participating both in preclinical and clinical trials. and were used for, yeah, as a treatment efficacy marker. And there's a lot of events here during this quarter that just passed. I'm here in the US, so I can see every day in the lab, we're receiving samples and we've been able to bring in extra personnel at the end of the period, and so we'll do so also during this fourth quarter. So we're seeing that the momentum is growing and it has been a trend that has now been ongoing for several quarters. Here's also an area where we think we can drive the revenues even further by extending our commercial organization. And we're looking to increase our commercial organization with a US-based rep specifically for the pharma business. That was my highlights. Anders, if I can leave it to you to go through the financial updates, then I'll be back and do the summary in Q&A.

Perfect. Thank you very much, Anders. Quick look at the financials. Q3 sales, about 3.3 million Swedish in total. If you look in local currency, as Anders said, that's mainly or 90 plus percent being US dollars. It's more than 60% growth. IVD tests grew about 21% on a yearly basis, even though the challenges that Anders mentioned with converting that clinical trial into IVD or clinical use. And also on top of that, the snowstorm that hit mid and eastern US that actually made us lose about one and a half week of samples not receiving our CLIA lab in California due to the snowstorm late January. Pharma services grew about 57% in Swedish kronor. It's about 70% plus in local currency. The major growth driver there is the pharma test services. We see that trend. That's a trend that we have seen now for quite some time. Most of the really large tier one pharma companies are preferring to send the samples to our CLIA lab, mainly in the US, but also to our lab here in Uppsala, where I'm sitting right now. We are still supplying kits to some smaller pharma customers, but we expect that kit supply to actually increase a little bit going forward because we see quite a lot of interest from Chinese CROs that are planning to start initiating trials for really large pharma companies. In China, there is a prohibition of exporting human samples out of mainland China. So that's why they need to buy the kits from us to be able to perform the sample or testing on the Chinese trials. So you go to the next slide, Anders. This is an overview of the year-to-date sales, about 8.6 million Swedish. That's a growth of 36% in Swedish and a little bit more than 50% in local currency. Here you see that the IVD tests in the US grew about 46% year-to-date. It's about 60% in local currency and our pharma service grew 40% And as you can see here, it's the same pattern here that the pharma test service is growing significantly, whereas the pharma kit supply is slightly declining. Go to the next slide, Anders. Last slide on financials, as Anders mentioned, improved cash flow. Of course, that's very important for us to try to minimize cash burn. So, our operating cash flow before change in working capital improved with about 4.4 million versus the same period last year. And that's of course then driven by increased sales and lower operating expenses and net operating cash flow improved by 5.9 million versus the same period last year. We closed the quarter with 88 million Swedish in our bank at the end of the reporting period. So that's it in terms of financials. I'll hand it back to you, Anders, to do a summary and then a Q&A session. All right. Thank you very much, Anders.

So to summarize, US clinical business. So we have reestablished a strong trend and we expect to see this in uh sequential quarterly growth especially that we have multiple initiatives also that we expect is going to be positively impact the sales development during the coming months and quarters and uh so we're i i get us we're now laying a foundation to be able to scale this on the US market and especially after with the Tempus partnership and also with the big IDN on top of the foundation that we already have. Pharma services, we have now had momentum for several months and we've built up this portfolio of agreements that we now seeing also that we are executing and we see the revenues and samples coming in every day. I think the position here in CDK inhibitor development, especially the next generation, is very, very interesting. It's an area with a lot of tension. It's a large part of the oncology therapy spend. And so there's a lot of potential here. And also looking further ahead on the checkpoint inhibitor area, it's even greater potential. So I would say that we're well positioned and I think we can grow with more resources and we're looking to close that. So good momentum across both segments and also events going forward that would further accelerate growth. I also want to reflect a little bit and also give a background to this succession that I've been now uh, here in the U S nonstop for two and a half months now. And it's given me access to, uh, uh, people and companies in the business and a better understanding of the U S market. I think, uh, it's been very, very inspiring. I've seen, we brought in people that has challenged us and see what we can do to improve that has been part of very successful companies in the business. are several companies here on the on the west coast that has been gone from zero to billion dollar companies in an oncology diagnostics and of course you want to learn see what what they have done what we can can learn from them and you can see that to a great extent we're following their path and also both with the combination of setting up your CLIA lab having control over the reimbursement making sure that you have a solid science foundation targeting the right type of oncologists in the beginning and also complementing your business with pharma services so we have all those pieces in place you can also see that the initial sales on the The clinical market has been slow in the beginning, and then after a few years, you see that you start getting the momentum. So we're following that path. So we can say that on this beginning, we have a lot of building blocks that is in place, which is the foundation I was talking about on the previous slide. We have constraints also. Our main constraints are resources. I strongly believe in the strategy. So we're doing a lot of stuff with little resources. But I think we have a strategy that is also addressing this. When we see that we have a model that is scaling like now on pharma, where every rep can bear their own costs and some margin, we're extending the organization and we're also improving efficiency on our US clinical sales. I think we have doubled the sales over, if you look back a few years, and we have reduced the cost to one third. So efficiency-wise, we're taking big, big steps. And now when we're getting momentum and traction and together with partnerships, I see that we can build on this. So it's very inspiring to do that, to see that. But also I realize that the US is where we have the momentum, where people have built this kind of companies, their experience and their reference cases. So I'm even more convinced that the next CEO should do something that I have difficulty to do, but to spend more time in the US market and preferably also have The relationship that I've been developing now over some time to have a strong network from the start, coming from the business, having this network. So I think this is a great foundation for the next CEO to continue to build on this journey and be able to create an impact company that can both create significant value for patients, for healthcare providers and society, as well as the shareholders. So that is a little bit of a background and some reflection and lessons learned. And with that, I'd like to open up for the Q&A session with Filip. Are you there?

Yes, I'm here. And thank you for taking my questions. So let's start with one of the bright spots in the quarter. um which was pharma services so you said in the q2 earnings call that you expected pharma sales to pick up in q3 and q4 which was true now for q3 do you expect this to continue even beyond q4 and onwards yes um first of all we hope to do a strong q4 we we we we're not

We're not giving away, as you know, financial target at this point. But we know your target and we're aiming to be in the vicinity of that. And with the Q4 that we have ahead of us, we think there's a good chance that we will be able to do that. And the good thing with the pharma services business is that we have the agreements and we have plans. We know we will receive the samples. So we're able to forecast that pretty good. Although sometimes there are delays outside of our control, so it's not 100%, but we know for sure that we'll get a lot of that volume. We know that will happen. And of course, if it's a delay in a couple of weeks, it can spill over to the next quarter, but Yeah, so the answer to that question is yes. Since we have those agreements, we have it planned with our customers, we're pretty sure that those revenues will come, yes.

Yeah, all right. And I see that time is running out, but maybe a couple more from my end. Sure. What are your expectations on costs in your Q4 and also for your next year?

Anders, maybe you could elaborate a little bit on that. See if we can switch this.

Sure. We are not giving away any guidance on that, as we have earlier communicated, but I would say that my guess is that we will be in the same range that we are right now. It might vary a little bit, Miljan, up and down from that perspective, but we should be fairly stable. Of course, The most difficult part there is the dollar exchange rate. A couple of weeks ago, it was down to 870 on Swedish kronor. Now it's somewhere around 940, which is a significant change. And we still have a lot of expenses in dollars from our US subsidiaries. So it's very, very hard to say exact numbers in terms of that, because there's a lot of things that has an impact on our spend level. I can't tell you any more than that. I'm sorry for that.

No, but if I can build on that, if you get the picture back. I agree with Anders, if you take a step back, we're not... looking to significantly change our organization, other than in areas where we will get a payback with more, we can increase revenues by investing. So the good example is the pharma services. Otherwise, we're looking to maintain the organization and the spending until we have a more secure and forecastable cash flow and a more solid financial position. No big change. And then on top of that, it's a very uncertain world with both a dollar currency rate that is flipping up and down and also tariffs on top of that. But it's not game changing. It's on the margin.

Yeah, sure. And the last question for me, quite a broad one, and you can give a high level answer, but can you elaborate on your... High level plan to achieve a reimbursement in the US. I mean, you're taking steps towards it, but what's the high level plan?

So this is something that's also when we did these workshops with people who have built these bigger companies. So we got... I mean, the clinical data is the foundation for all commercial activities in this business, you say. but we're looking also into do clinical trials with payers that to generate that kind of data so because we already have reimbursements from medicare we have client bill agreements so then it would be the private payer segment to to generate targeted data towards that so we have ongoing initiatives look into that and we have ongoing clinical trials already that i think will improve that as well so i think that that that It's not something that will take place immediately, but over a few years, I think we will be able to show a very strong health economic business case for payers. So I think it will be a strong side of ours. Currently, private payers is not a very big volume of ours. So a Medicare client bill is the majority. So it's not that we're leaving so much on the table right now. But over time, this becomes an important factor to put in place. And we're working on that. Yeah, super.

That's all for me. So thank you once again.

Thank you very much. Thank you, everyone, for listening to our call. And over and out from San Diego and Uppsala.