Devyser Diagnostics AB (publ)

Again, welcome to the Devisee Q2 2024 earnings call. It's a great pleasure to have you all here. This is the first time we published our Q2 result in July, earlier end of August, and that's something I'm very proud of. Today, you will listen to me, Fredrik Alkstein, the Devisee's CEO, and Thijs Kipling, our chief commercial officer and responsible for business development. I have also asked our CFO, Sabina Berlin, to join us during the Q&A session. A lot of positive things are happening in the company. Those of you who follow us more closely may have seen a record number of positive press releases during the quarter. The sales from boom tenders etc. informed about in these published press releases are not yet reflected in the Q2 numbers. We'll see that later. Today we embark on a journey to our Q2 results. The second part of the presentation will be dedicated to highlighting the key achievements from the portal and discussing our commercial outcomes. Sales developed very well during the quarter and amounted to 53.2 million SEK, a new record. The earlier record from last year was 50.7 million. Sales growth compared with the same quarter last year was 41% in SEK and plus 40% in local currency. All growth is organic. The growth of plus 40% in local currency is the highest growth we have seen for one single quarter since the company was listed. The growth for the first six months of 2024 was 35% in SEC and 34% in local currency. The growth for the last 12 months was 38%. With our innovative products, high market growth, well-suited commercial organizations that we have heavily invested in over the last quarters, and some of the best commercial partners. We are confident that our current positive sales trend will not only continue, but also strengthen. While we may face individual quarters that have not performed as well, the overall trend is clear. Our sales are on a significant upward trajectory, with most quarters expected to be record-breaking. Even with the impressive sales growth we have achieved in the first six months, we are confident that we can maintain this level of growth in the second half of the year, achieving at least the same growth in local courtesy as we did in the first half of the year. It's always dangerous to look at single quarters and draw too many conclusions from them. As single orders can heavily affect the quarter, it's much better to examine rolling 12-month periods. EMEA grew by 32% compared with the previous 12 months. During the quarter, we saw high sales growth in the Middle East and the European distributed markets, even if we are not fully satisfied with the development of the direct sales markets in Europe. Asia-Pacific grew by 26% compared with the previous 12 months. Q2 grew by 75% compared with the same quarter last year. During the last 12 to 18 months, we have signed up quite a few new distributors in Asia, and some of them have now started to generate revenue. The growth in North and South America was plus 166% compared with the previous 12 months. We are very optimistic about North America and see the flat development during the last quarter as a result of an uneven purchasing patterns from one of our distributors. And please remember that we do not yet have that many customers in North America. The potential in North America is massive and we have just started to penetrate this huge market. North America will be one of our top priorities, both for the near, mid and long term. Our direct sales represented about 75% and our distributed sales represented about 25% of total revenue, both for the quarter and for the last 12 months. However, as sales through term of issue are increasing, and new distributors in regions like Asia and the Middle East are added, we may see an increased distributed share of revenue. One of Devizor's strengths is its business model. We have very high gross margins because we only sell consumables and software, new equipment. Since I joined Devizor in the fall of 2020, we have managed to increase the gross margin from around 75% to around 85%. The reason is a scalable production process, even if it up to now has been rather manual, and our ability to increase prices. However, as we had grown out of our production facility, we decided spring 2023 to move to a bigger facility to enable higher production volumes and automate production processes. We have signed a seven year lease with an option for another four years. With one shift in production, we can stay here even if we have a growth of in average 50% per year. We got access to the new facility in January this year and moved our offices to the new facility in February. During the spring, we have worked extensively to build up the production and R&D part of the facility. As with all certified and regulated business, this must be done by the book, documented, validated and verified. It must be approved by the regulatory authorities and notified bodies when ready. The regulatory authorities have now approved the new production facility and we can move production and R&D labs from the old facility to the new one during Q3. All work to finalize the new facility has been costly. Cost of goods sold was negatively impacted by 3 million sick during the quarter. We also had a negative impact. We also expect a negative impact during the third quarter, but we expect to be back on track by the end of Q4 this year. And that's a gross money in excess of 80%. This investment will help us to drive down production costs even further and help us continue automating the production processes and accordingly increase our gross margins in the long run. It should also be mentioned that to minimize risk, we decided to rent both facilities, the new one and the old one, during the full year of 2024. This means that when we go into 2025, we will not pay rent for the old facility. The quarter's EBIT was in line with our expectations. It amounted to minus 23 million SEK compared with minus 14 million SEK in the same quarter last year. A couple of one-time items caused a low result. The move to the new premises, as explained earlier, was 3 million extra during the quarter. Double rent for new and old premises. We have added 3 million SEK in additional rent costs per quarter during 2024. We had also increased costs for our expansion in North America, including, among other things, work to get the best possible compensation for our products in our clear lab, as well as work on setting up our own warehouse in the US. In total, another 3 million SEK. The positive development of the device's share price also meant that during the quarter we were hit by higher costs for our incentive programs. The total cost for incentive programs, etc., amounted to 2 million SEK during the quarter. It should also be noted that during the second quarter of 2023, we brought back a provision of 2 million SEK for a so-called retroactive payback fee. 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% from 2024 to 2026. Devisa has a very strong financial position, 201 million SEK in cash at the end of the quarter and no interest bearing debts. During the quarter, an employee warranty program expired and the options were exercised. It meant a capital injection of some 17 million for the company at the end of the quarter. With that, I'll leave over to Thijs to give some highlights from the quarter and a commercial outlook.

Thank you, Fredrik. Indeed, Q2 was a record quarter, and I'm happy to take you through some of the updates and the outlook to give the gist and the understanding that, in fact, we're just getting started. On June 17th, if you move to the next slide, we announced that we have expanded the agreement with Thermo Fisher to now cover global territory. The reason we didn't provide Thermo Fisher with access to global territory for our transportation products already a year ago, when we first signed the agreement with them, was due to the fact that we wanted to be reassured that customers responded well to the collaboration, as well as we wanted to be confirmed about the investments and the dedication made by Thermo Fisher. This we have now seen, and hence we gladly are now working with them on building a significant success globally. Our products have long been advocated for by key opinion leaders. But now we're seeing laboratories who start bringing in these products in their clinical routine across both Europe and North America. And thus we are confident that the momentum will only propel further once we get users across Asia Pacific on board as well. Allowing Thermo Fisher access to global territory is attractive for the revenue growth of the visor since we can now expand the market reach by an extra 43% measured on the number of kidney transplantation in the Asia Pacific region. Together with Thermo Fisher, we are addressing a more than 1 billion US dollar market and have already made a lot of headway together establishing new standards within the market using the divisor one lambda post-transplantation products we have already reached the first ibdr approvals for both our assays and software we are pursuing fda approval in the us and we are on solid path towards also having our tests reimbursed in our clear certified laboratory you can move to the next slide please Beyond the revenue logic related to the global partnership, it equally much helps with cost synergies, since we no longer need to maintain a divisor-only product line for the transportation products, including taking them through regulatory approvals, et cetera. These efforts will now be focused on the divisor and Thermo Fisher co-branded product line only. Hence, truly a sound business logic and business decision as we now look into year two and onwards together with Thermo Fisher we're intrigued by the opportunities ahead not least on the product pipeline front where we have several new and potentially groundbreaking product launches coming up while these products are not automatically included in the master agreement that we have with Thermo Fisher we do believe that these products will significantly enhance both Thermo Fisher's and our position within the transportation area for the years to come. Let's move into Italy. During Q2, we closed deals worth 84 million Swedish kronor in Italy, including an all-time high tender covering the region of Tuscany. We continued expansion of our oncology business, as well as we won yet another deal for our Thalassemia product. If you add the announcement that we did late last week, that number is close to 90 million Swedish kronor in the past three to four months. Italy remains our largest market, and I'm thrilled to see how the team continues to take market share and to expand our business. Looking ahead, I'm excited to see that we still have a large number of opportunities to further accelerate this momentum. I'm sure that a lot more will come. Focusing on thalassemia. Thalassemia is one of the most prevalent hereditary diseases in the world. The market is therefore huge and at Devizor, we're well positioned with our products. which grew almost 60% during first half of this year versus same period of last year. And now is about 10% of our total sales. We're pursuing a large number of opportunities in markets where thalassemia prevalence is high, such as Italy, Spain, Saudi Arabia, Malaysia, India, Singapore, and I could go on. Recently, our thalassemia test was chosen for state screening program in California, the US. And we are pursuing other similar state programs within the US as well. Lastly, I can share that we are in dialogue with large pharmaceutical companies who have expressed interest in the product as well. And I will soon come back sharing more information about these potential engagements in the months ahead of us. Another interesting product is our RSD test, where we have seen lots of strong traction. We continue to expand our market position, and we just signed up with another leading laboratory in Canada, in addition to Hema Quebec, which we already have announced. In addition, we announced in December that our RSD test was chosen for nationwide screening in Wales, which is just yet another country to the list where our RSD test is chosen for either state, region, or nationwide screening. One of the markets yet to be penetrated with RG testing in the US, where the market standard is still the prophylactic injection for pregnant women. However, just recently, the prophylactic drug Rogam came into shortage by the suppliers. And thus, we now are seeing a very heavy intake of requests for testing. in the US. I have early on been very bullish about our market opportunity for this product in the US. And now, especially once the market turns towards testing before injection, I am even more bullish with this potential. These days, we're in dialogue with some of the largest laboratory chains and laboratories in the US around RFC test and i'm hopeful that one or several of these opportunities will land during this year and i'm excited to be communicating soon about this. let's move into the next update regarding you know what is what does the future hold with regards to thermal picture we now one year in and we're already seeing strong growth and currently are up some 65% above. H2 2023. With lead times, as we have talked about before, being 12 to 18 months, we're just in the beginning of the growth journey with Thermo Fisher. And we're confident that this will accelerate in the month and the years to come. We're adding three new indications, heart, liver and lung. We're pursuing FDA clearance and launching new products that will be groundbreaking in the care of transplantation patients globally. The additional three indications, as mentioned before, will expand our addressable market and measure on the total number of transplantations done globally. This is an exciting time in the field of transplantation, and I'm absolutely sure about Devizor becoming a key player for many years within this exciting area. Looking at what's next in the US, We continue to pursue the opportunities within testing for cystic fibrosis following the updated guidelines from last year. Our first customer is soon reaching clinical routine, and more opportunities are already in the pipeline. RHD, as mentioned, looks very promising, and I'm confident that this will be a great product for the US market in the years to come. And alongside gaining traction in Canada, this product has the potential to become one of our best selling products in the company. In the US, 15% of the population are ARG-negative, meaning that across the 3.7 million new births annually, there's a patient population of 550,000 patients annually who should be tested for their fetal status, which is a very attractive opportunity for the advisor now with the vacant interest in ARG-D testing rather than defaulting to the prophylactic treatment. Devices Genomic Laboratories, which is our CLIA-certified laboratory in Atlanta, is doing well. We are on track towards having our first products being reimbursed and covered, as well as our engagement with the UK-based oncology company Cyted are moving along well, and the laboratory are fulfilling the objectives as a growth catalyst for Devices in the US. Within just a few years, I'm confident that our North American business will be the largest region that we have in the company, even bigger and ahead of our otherwise large and strongly performing market that we have in Italy. With that, I hand it back to you, Fredrik.

Thank you, Thijs. 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's done via all our sales channels, direct sales, partners, via our CLIA lab, and via distributors. With our innovative products, a high market growth, a well-suited commercial organization that we have heavily invested in over the last quarters, and some of the best commercial partners, we are confident that the historical development we have seen can continue and even enhance. However, as important as high growth is to continue our way to profitability. It's our main focus.