Devyser Diagnostics AB (publ)

Thank you for that. And again, welcome to the Devicer Q1 2024 earnings call. It's a great pleasure to have you all here. And as I said, today you will listen to me, Fredrik Alkestin, the Devicer CEO, and our Chief Commercial Officer, Thijs Kipling. I have also asked our CFO, Sabine Wallin, to join us during the Q&A session. Before we go into our Q1 numbers and talk about the nice developments we are seeing, I want to take five minutes to repeat what Devizor is to our new and potential new shareholders. Devizor is becoming increasingly well known as a reliable, high quality, next generation sequencing reagent provider. Through our high growth, innovative products and collaboration with industry giants like Thermo Fisher and Illumina, Our name and brand are getting a lot of additional recognition. The VISA was founded and driven by the value of a fast and accurate diagnosis. It's the foundation for everything we do to ensure every patient has access to a correct diagnosis in the shortest possible time. Genetic tests can still require a very long time for patients before they get their results, causing worry and potential harm for the patients. Ultimately, we want to enable faster response times for genetic tests and early detection of diseases to help people live healthier and longer lives. More than 100,000 people were tested with our product in Q1 2024. That is something I and my colleagues are very proud of. Divisor is on a journey. As you may know, we have had a very nice development over the last years. including average organic revenue growth of 36% per year, gross margins well above 80%, launches of many very innovative products and commercial expansions, both by setting up direct sales organization and entering into collaboration with some of the most successful global companies. However, we are confident that we are just beginning out a fantastic journey. Over the last 9-12 months, we have taken some very important steps to build a global, fast-growing, highly profitable diagnostic company. Our mission is to be the pioneering leader of diagnostic solutions and provide fast, accurate and easy-to-use solutions to labs worldwide. Our vision is a world where personalized medicine is universally available thanks to simplified and reliable genetic tests. So what do we do? We develop and market genetic test solutions to guide targeted cancer therapies, fast diagnosis of hereditary diseases and post-transplant follow-up. All development and all mind tracking are taking place in-house in our facility in Stockholm. We sell our products, library prep kits and software to clinical diagnostic labs via our own sales reps and via partners or via distributors. We also provide test services to labs and pharmaceutical companies. We have developed and launched more than 35 IVD and IVDR registered products. We are active in three diagnostic areas, hereditary diseases, oncology and post-transplantation. We're based here in Stockholm, but we have subsidiaries, sales offices in eight countries, plus a CLIA certified laboratory in Atlanta, Georgia. We have around 120 employees. Our customers select devices because we provide simple, accurate, and efficient genetic testing solutions. Our kits and software are easy to implement, maintain, and use for the laboratories. This has been the foundation for our successful growth because we design our products with a deep understanding of the clinical laboratory workflow to put the genetic laboratory team in focus. We currently sell in over 65 countries, the blue countries on the map. We have four sales channels, direct sales, partners, or a clear lab, and distributors. You will hear more about that a bit later on in the presentation, and Thijs will cover that. Today, we sell directly in some 15 countries, all in Europe and North America. We currently have one partner, Thermo Fisher, selling our transportation products exclusively exclusively in North America, Europe, Brazil, and Saudi Arabia. We have 50 plus distributors that are selling a product in some 50 countries. Our CLIA lab in Atlanta offers test services for some of our products for the US market, but it also offers test services to pharmaceutical and diagnostic companies. Europe is still our dominating market, with 88% of total sales for the last 12 months. America, however, is growing fast. 9% of total sales in the last 12 months, compared with 3% the year before. EPEC is still a rather small area for us, with only 3% of total sales. For the last 12 months, 75% of revenue came from direct sales, including Del Piala. and 25% from distributed sales, including the sales departments. The growth in the company is high, I would say even very high. Organic growth has been 36% in average since 2015, that despite the big hiccup in 2020 due to COVID. We reached 180 million in revenue for the last 12 months. So let's move over and talk about the first quarter. Sales developed well during the quarter and amounted to 51 million SEK, a new record. The earlier record was from Q3 2023 when we reached 47 million SEK. Sales growth consisting entirely of organic growth was 28.5% in SEK and 27.7% in local currency. Although these are high numbers, we are optimistic about increasing the growth rate even more in the future. Growth in some of the direct markets in Europe and the distributed markets in Asia was lower than decided during the quarter. Europe grew by 22%, while Asia had a negative development, primarily due to uneven purchasing patterns from our distributors. However, we assess that Europe's, I would say, mother's growth is only temporary. The strong development we saw in 2023 for Europe should soon return as several of the important steps we took in 2022 and 2023 materialize fully. You also see the negative development in Asia as temporary. During the last 12 to 18 months, we have concluded several distributed contracts in Asia, and the expectation is that these will start generating sales in the second half of 2024. Most gratifying is that the growth in North and South America continues to be strong. The first quarter showed a sales increase of 291%, although from a low level, of course. Our main focus in 2024 and 2025 will be in North America and Europe. we will continue to expand and strengthen our market shares in both markets expect continued strong growth from from these regions in the future as well all our product areas are growing strongly particularly however the transportation products which continue to develop very very well the gross margin amount is Sorry, I jumped a bit further. The gross margin amounted to 82.7% compared with 85.2% in the same quarter last year. The low gross margin can primarily be derived from increased production capacity built up to take advantage of our business opportunities and meet future expected volume increases. Significant investment has been made both in production capacity and in new employees. However, we are positive about the gross margin development over time, partly because we have a scalable manufacturing process where the increased volume will soon absorb the increased fixed costs, and partly because we still have the opportunity to increase our prices continuously. The result for the quarter was in line with our expectations. The EBIT increased to minus 12.2 million SEK, compared with minus 19.1 million SEK in the same quarter last year. As announced in the report for the third quarter of 2023, our move to new premises has entailed some extra costs that burden the fourth quarter of 2023, and to some extent, the first quarter of 2024. Despite this, the operating expenses in the first quarter compared with the first quarter 2023 only increased by 9.7%. We are convinced that the positive earnings development we saw in 2023 will continue and that we will reach our financial goal of an EBIT margin exceeding 20% during the period 2024-2026. Deweiser has a very strong financial position, 250 million SEK in cash at the end of the quarter and no interest-bearing debts. As we have moved to a new facility, we have invested quite much in our production capacity during the quarter. The investment in production equipment amounted to roughly 17 million during the quarter. You will not see any such investments during the rest of 2024. we will see a nice future sales development with our innovative products high market growth a very professional commercial organization and some of the best commercial partners at the moment we do not see anything that can change this of course we may have single quarters that will not perform that well but the trend is crystal clear sales are increasing much and most quarters will be a record quarters High volumes will give high gross margins even if we were affected in Q1 by our move to the new facility. The yellow bars show quarterly sales and the orange line shows quarterly gross margins. So with that I leave over to Thijs Kipling our Chief Commercial Officer and he will give you a commercial outlook.

Thank you Fredrik. I'm very pleased to be adding some more context to the device of commercial successes that we've had here during Q1. In fact, I'm today calling in from Atlanta in the US, where I'm here meeting with new customers, as well as reviewing the impressive growth brand that we have for North America together with our great US team. As Frederick already mentioned, we are commercializing through four channels. And I want to give you a little bit of perspective here. The first channel is our direct sales for established markets where we have our own team and our own divisor legal entity. Our direct sales will continue to increase, although we expect the share versus total sales to likely reduce gradually due to the increased utilization of partnerships. Because partnerships is our second channel and the revenues coming from partnerships will grow faster than any other channel that we have. As we increase the number of partnerships. Partnerships are typically exclusive. It's a broader and very attractive collaboration. And today we have one partner, as already mentioned, being one Lambda, a part of Thermo Fisher. But we do expect several more to come. Our third channel is our lab services, utilizing our certified laboratory, which is a strong platform for continued growth. We do both patient testing on our own products on behalf of other companies, and not least, do we pursue projects together with pharmaceutical companies. Our fourth is the distributor channel. Today, we have, as mentioned, about 50 distributors, which is a number that actually has increased a lot during the past two years. Distributor contracts can be both exclusive and unexclusive and is typically used for us to enter a new geographic market. And once we see a large enough demand in a distributor market, we're typically converting that market to become a direct sales market. Our agreements with One Lambda is progressing plans, and we're very pleased with both their progress and our collaboration. At least once per quarter, we have a face-to-face joint steering committee meeting with the management on both sides, but currently we're actually meeting a lot more often. Our test for solid organ post-transplantation, the accept CFDNA, was initially launched, focused just on kidney as an indication. However, during 2024, we are broadening the intended use to also include heart, liver and lung transplants. Significantly expand the market simply by the increased number of patients that our tests can reach and help, which we're very excited about. In addition, We have two new, rather substantial new product launches coming up, and we are currently in dialogue with 1NAMDA about these, and they may become part of the existing contract that we have with them. All in all, it's a very, very positive story, and I'm confident to say that we have a lot more to be said within this market during the coming years. Now onto our device genomics laboratories here in Atlanta, which is our clear certified laboratory. We have signed our first commercial contract with the UK based on quality company cited. Which came nice. One. And as already communicated, this has the potential of generating up to 25 million Swedish kronor over the first two years. Currently, both our RHD and Chimerism tests have been validated in the lab, while we're still working on validating SFCFDNA and our test for specific purposes. As of April 29th, we hired a Vice President of Market Access, Reimbursement and Public Affairs here in the US, which we are very excited about, and I'm confident that you'll soon be hearing about the results from this capacity within our divisive team. During our Q4 earnings call, we mentioned the updated guidelines made for cystic fibrosis here in the US, changing the guidelines from detecting 23 variants to variants. And I'm happy to report, as press released already, that we have brought on our first larger account the University of North Carolina, the UNC as we refer to it, with an estimated total order value of up to 10 million Swedish kroner over four years. And to give you some perspective on the significance of the market opportunity here in the US, then the UNC account has a volume of a few thousand tests annually in a market that we estimate to be holding approximately 1.4 million tests annually in the United States. Some of you may already have picked up on the announcements on April 29th made by the FDA on the long awaited final rule around the regulation of laboratory developed tests, LDTs. As expected, the final rule is more or less consistent with the proposed rule communicated by the FDA on September 29th of 2023. So for Devizor, this was as expected. Just like in Europe, the FDA wants to increase patient safety by regulating the many non-regulated tests available here. Devizor is an advocate of increased patient safety, and thus we do embrace the change. And we do also believe that Devizor is actually very well positioned based on our experience taking products to IVDR approvals already. The final rule of laboratory developed tests is a heavy document covering 528 pages. And together with our consultants, we have gone through it over the past week. And so far, our conclusions are the following. There will be an up to four-year long phase-in period. It is expected that some suppliers the suggested FDA rule, which may lead through further delays. Selling of divisor products will not be affected in the short term. Over the long term, some of divisor's products, depending on its risk class, may need FDA approvals, but that work has been going on in divisor for already quite some time. A cornerstone in our commercialization is to be claim-based and differentiated. across both europe within ibdr and the us with fda and this is another change during the past two years to how divisor have otherwise been working in the past this means that we are investing more into clinical and regulatory programs than ever before and already today we are seen and recognized as a leader within europe our ibdr certification and the track record that we have, which is an approach we are now also bringing to the US. In this regard, we welcome the partnership as announced with Illumina being a key component for us to commercialize on their DX platform as required by the FDA. A few words on the Illumina partnership and the agreements we press released earlier in Q1. This agreement enables us to develop and commercialize end-to-end solutions on the Illumina MySeq DX. The DX instrument has a preset software that can't be altered and thus is a guarantee for consistent reproducibility, being a requirement by the FDA. For a smaller company like Divisor, this is a very significant achievement to strike such an agreement. And yes, instrument provider globally. And we're excited to see this grow even further during the coming years. We plan to have our transplantation products and our product for cystic fibrosis to become FDA approved as the initial ones. And with that, Fredrik, I give the word back to you.

Thank you for that, Thijs. At our earnings calls, we speak very much about the nice sales development we have and our earnings development. We do not speak that much about the world class and I would say the world leading development of products that are taking place in the company. And that is important for our future sales growth. As you may know, since the company was founded 20 years ago, we have developed and registered and launched over 35 products. We expect this nice development to continue. We have more than 30 employees within development, and they are contributing a lot. Just over the last 12 months, we have launched seven, eight new products. In addition to the work on upgrading products from IVD to IVDR, we did that in addition to that, of course. We expect to launch five to 10 new products in the next six to eight months, including three, four transplantation products. In addition, we are investing a lot in our clinical affairs group and we are running quite many clinical studies at the moment. As you know, over the last two years we have taken some very important steps to build a global, fast-growing, highly profitable diagnostic company. As you also have heard, we are very optimistic about the future. We are focusing on North America and Europe. It is done via all our sales channels, direct sales, partners, clear lab and distributors. We are very glad that the investments in the US market have given results and that America now represents 9% of our total revenue. I'm also very proud of the to the work at the company like devices that we year after year can develop and launch many new innovative products. I'm optimistic about the same interesting about some very interesting product launches within the next six to 18 months. However, as important as high growth is to continue our way to profitability, and that's our main focus in 2024. So with that, I open now up for questions.