Flerie AB (publ)

Good morning everyone and hello wherever you are in the world. Welcome to the Q1 2025 report presentation for FLIRi. I'm Ted Fjellman and joined with me today Cecilia and the team as well. to take any questions at the end of this session. Let me start straight away by saying it is spring in Europe, and we are, despite all of the market conditions ongoing now, excited about the future, trying to make the best out of a very turbulent time. But let us all remember, just skip over this disclaimer, which I all hope you have read through, that, of course, FLIRI is a long-term investor. We're a biotech and pharma investment company. We have 27 portfolio companies in our portfolio, 74% in private companies. And as you can see from the middle here, we indeed do have a diversified portfolio, which means we can weather the kind of storms that we're seeing on the markets at the moment because we're really developing uh medical technologies are mostly pharmaceuticals through very long-term development programs and that means our sector and what fleary does is uh almost not quite but almost immune to these you know, short term fluctuations, because in the long term, this is really required by society. We have an aging population and they need more and more medical drugs and solutions, the kinds of things that our companies are developing. And of course also the big pharma companies are standing in front of patent cliffs. A lot of their revenue is at stake in the next five years. So the types of companies we're developing are the ones that the big pharma companies are really interested in. And our job at FLIRI is to ensure we optimize the portfolio and ensure that these companies can really develop to inflection points where we either sell them to global pharma or are able to take them to market ourselves. And as you can see in the center here, over half, the majority of our companies are either in late clinical stage or in commercial stage. The total net asset value is almost 4 billion crowns. And we've been doing this for quite a number of years, operating as an evergreen investor with a specialized team who really know what they're doing. We've built companies ourselves, and we also syndicate together with other specialist investors around the world. So that's in a nutshell, a reminder for those of you who might be new shareholders to Fleury, or just new interested parties listening today and i welcome you all so let's go into the quarter one and if i were to sum this up in two sentences i would say this is about proactive portfolio management we have indeed had to make a tough decision regarding one of our us companies and but it's all about maximizing opportunities in every market condition when there are tough times the tough get going So the current net asset value in firepower, almost 4 billion crowns, as I said, that translates to 50.56 crowns per share. And for those of you who joined in the IPO last year, we were, of course, the first life science IPO in over three years. It was a difficult time actually to do an IPO. This was in fact our IPO price, 50.6 crowns per share. So despite very difficult times, and yes, we went up and down, we're actually quite proud that we've weathered the storm so far better than some others. We actually also are very strong and have a lot of flexibility when it comes to cash and cash equivalents. The 802 million sec that you can see here represents 10.27 sec per share, or about 20%, a fifth of our NOV that we have in cash. So that gives us flexibility. And given that we aim to deploy about 10% of our NOV per year, that means we have a roughly two years of deployment, which again means we can weather the storm better, I think, than many others. Significant value changes during the quarter. I'm showing you here the three largest ones individually. If you have had time to read our report this morning, you'll see that overall, we've had a negative development of 197. Cecilia will speak a little bit more about that in detail later. But these three are actually one negative and two positive developments during the quarter, and they're the largest ones. And you can actually see All three of them are publicly listed companies. Expray is our company in the protein kinase inhibitor space, where one of their products is very close to marketing in the US, we hope, this year. Synthiella is in the stem cell research space, positive 31. a fair value of 162 and lipum is also in the in an exciting area in autoimmune space treating rheumatoid arthritis they also had a positive development during the quarter for us plus 29 million sec you can see that all these three companies represent between 5.6 and 6.7 percent of our share of fair value so again i want to highlight that even though there are fluctuations especially in publicly noted publicly listed companies Because we have a diversified portfolio, any one company doesn't overexpose us. If I go to the next slide, you can see here that there have been other significant events during the quarter. I mentioned briefly that we had to make a tough decision in one of our US companies, and that's Provel Pharmaceuticals. And Flirio wrote off the entire value, actually, as stated in our February NOV report. Prevels later filed for bankruptcy in the US right at the beginning of this month. This has been difficult for us, of course, but it's much to do with the fact that a supply agreement or distribution agreement was canceled, which really meant that it was impossible for Prevail to continue. We did try some ways, some creative ways to do that, but in the end, we had to decide against further support to that company. And I think that shows that Fleery does know how to optimize even in difficult times. And A3P Biomedical is another example of that. We believe the company is long-term a very good company, but we decided to divest its holding in our holding. And for total consideration of 71 million SEK, a little over 71, that's actually, as Cecilia will talk a little bit more, about 50% higher than what we had in our... So we were able to divest and we can then sort of reprioritize to our core areas, which are pharmaceutical development and adjoined services. Last but not least, we've done a creative proposal, I should say, for Tolerancia, and I will talk a little bit more in detail about that on the next two slides, where we have proposed and the board of Tolerancia is also suggesting to their shareholders to accept our proposal to essentially fuse with Tolerancia and then take Tolerancia private. I think many people talk about this when a small company is listed and therefore gets into this difficult position where they can no longer raise money and therefore cannot really do what they need to do to create value. And in this case, go to phase one clinical studies, then something has to be done. And many people speak about why don't you take companies private? And we actually doing what other people just speak about. And let's talk about that in more detail. so the current status is that we propose this merger with fleary because of course both companies are listed we are we are of course dependent on approval at two general meetings on may 7th for tolerancia and may 14th for fleary and the targeted completion if that goes well is in august 2025 so anyone who's a shareholder in tolerancia will then become a shareholder in fleary And then we will essentially spin out the company again. The valuation of Tolerancia is 136 million. So as mentioned, 50% premium to the pre-announcement market price. And if you want to calculate there, 88 Tolerancia shares will give you one share in Fleary if you want to compare those two prices or share prices today, for example. The rationale behind the proposal is relatively straightforward, although I've had a lot of questions about this and generally speaking, I think people understand and many people have also pointed out that we are indeed doing what many other people are just talking about. There is a challenge in the current market. There's a need for recapitalization in Tolerancia to be able to do the phase 1 to 8 trial. There's very limited public market appetite for these early stage biotech financing. And that's actually gotten even worse, as we all know what happened at the beginning of this month in public markets. And this uncertainty unfortunately hits the biotech sector even harder than many other sectors. Inflationary type of processes are not good for a sector where you have long-term capital need and basically long development timelines. When time is expensive, that's not good for biotech. so we have to do something and that's what we're doing the post merger advantages is that we'll have an enhanced funding environment because we do know for sure that there are companies out there that do like the types of projects like tolerancia and would invest if it was a private company so we we have uh you know reason to believe that we will be more successful uh to to try to arrange that once we have taken a private We want to focus on long-term development and simply tolerancia would not be able to go to a phase one clinical trial at all and get those very crucial clinical results if we don't do something like this. There is no alternative proposal by anyone else that we have seen so far. there's increased potential for strategic partnerships that's surprising to me originally but maybe it's not surprising to many of you in the audience if you've been in the sector that the pharmaceutical companies the larger ones they don't tend to buy small biotech companies that are listed they'll tend to go into licensing agreements with private companies and we think there's a higher chance for that as well the benefits for toronto shareholders are that they get access to fleary's diversified portfolio because they became they will become fleary shareholders if this goes through in the in the general meetings and of course they shift to a share with higher liquidity so if they do want to have cash they could sell the fleary share as well so that's also an opportunity for them and then access to specialist co-investors networks if they want to stay they obviously know that it's good for tolerance and they still have an exposure to tolerancia and tolerance that can then hopefully go into clinic And I think the valuation of 50% premium to pre-announcement market price is indeed very generous. As we've seen, even after we announced this, it's not like public markets have gotten any better. So I think the outlook for Tolerancia and companies like that is unfortunately looking worse over time, unless we hope that the trade wars in the world will get better soon. But I think nobody listening here believes anything massive will change there for the better in the next few months or even years. year or so. So with that, I will pass it over to Cecilia to go through some more details of the numbers.

Yes, thank you, Ted. So I'm going to talk you through the financial development in the quarter and with Fleury being an investment company, of course, the main driver for the financial development is our portfolio valuation. Before we head into the actual numbers, I'd like to revisit our valuation methodology and just comment shortly on how and when we can change the valuation of our portfolio and portfolio companies. As Ted just mentioned, we have both publicly listed and private companies in the portfolio. End of Q1, the listed company constituted 26% of the portfolio fair value and the private companies were 74%. In terms of valuation, the listed companies are valued at the latest share price and therefore the fair value of a listed portfolio is expected to fluctuate. The private portfolio companies, on the other hand, are valued based on the latest financing round. So normally the valuation for a private company is unchanged between two financing rounds. And events that would trigger an appreciation would be a capital raise at a higher valuation, an up round. So, unless we have an up round, we do not increase the valuation for a private company. On the other hand, events that would trigger a down round, a financing round at a lower valuation would be an event that would trigger a depreciation. And in these times, as Ted already talked about, With increased macroeconomic uncertainty, we can expect the risk for down runs to be higher than before. We also reduce the valuation of a private company, regardless of the financing round. If a company has had a trial setback, for instance, or is experiencing delays in sales growth, that will be a situation where we adjust the valuation of that specific company. And following our active ownership model as active investors, we have board seats in all our portfolio companies except one. So therefore, we have good and timely information on how our companies progress and when they are facing issues and problems. So we reduce the value when an event that triggers a depreciation occurs. We then continue, of course, to work actively with the company to support and solve the problem. And when we see that the company is getting back on track, we reverse the breakdown back up to the value of the latest financing round, but not beyond. So we make reversals of a We previously made a write-down, but we never increased the valuation to more than the latest financing round. So, with the valuation of our portfolio as a backdrop, let's look at the numbers and the development in the quarter. So, next slide. Thank you. So, just a repetition. The net asset value was 3.947 billion end of Q1 and 4.198 end of December. So, it's a decrease by 251 million in the quarter. NAV per share was 50.56 SEC as compared to 53.77 of Q4. And the portfolio fair value end of the first quarter was 2.874 billion as compared to 3.072 in the beginning of the year. It's a decrease by 198 million. And as you can see in the chart to the far right in this slide, the change in the portfolio fair value is explained by mostly a negative fair value development. It's minus 197 million. And also the divestment of shares, mainly A3P, as we already talked about, but also a small portion of our shares in Agetes. So in total, 48 million. Now, of course, We gained 73 million in cash from these two divestments. But when we talk about the portfolio value, a divestment means a reduction of the portfolio. And in addition, we invested 48 million in the portfolio in the quarter. So with that, let's look at the segments more in detail. And if we go to the next slide, yes. OK, so the portfolio is structured into three segments. We have a product development or PD segment. That consists of the early stage biotech, pharma and device companies in product development phase, preclinical and clinical stage. We have a commercial growth segment or CG that consists of companies that are already selling products and services, but where we help with their go-to-market strategies to increase market share and reach profitability. And a third segment called limited partnership, where we, Fleury invests in another investor's fund, and that allows us to access the network of that investment company. So it helps to build the Fleury brand and we can also, or it can benefit our other two segments via, for instance, co-investment opportunities with the general partners themselves or with their network. The product development, or PD segment, as you can see, is the largest. Total fair value end of the quarter was 2.27 billion, compared to 2.394 at the beginning of the quarter. It's a decrease by 123 million. The change in fair value of the companies in this segment was negative, 160 million. And it relates mainly from the listed companies, Xpray, Tolerancia, Mendes and Agetes, that in combined decreased 141 million in the quarter. But as we already mentioned, we also see positive development for the listed companies, Scintilla and Lipum, that increased by 31 and 29 million respectively. In our portfolio, we have 11 investments that are not Swedish and therefore denominated in foreign currencies, mainly US dollars, but also pounds and euro. And as a consequence of the Swedish Krona strengthening it against foreign currencies, the fair value for these companies decrease. So in Q1, we have a total negative FX effect of 84 million for the portfolio as a whole, of which 78 million of this negative FX development relates to the PD segment. So that's also a cause for the decrease in the fair value, of course. We have made some investments in the segment, 39 million in the quarter. The largest was a second tranche in Viterra Biomedical, but also smaller portions in X-Pray and Synerkyne. And we divested a small part of our shares in the Getis in the beginning of the quarter. Moving over to commercial growth, our second largest, where we had a fair value end of the quarter of 518 million, as compared to 587 at the beginning of the quarter. That is a decrease by 69 million, mainly due to, when we look at the portfolio value, mainly due to the divestment of shares in A3P. That took out 46 million of the decrease of the portfolio value. And as we said earlier, the divestment generated a cash inflow of 71 million, and the capital gain in the quarter of 25 million. The decrease is also due to a negative share price development in the listed company Nanologica, 22 million negative, and a small FX effect. So the total fair value change was a negative 23 million in the segment in the quarter. We mentioned Provel earlier. The commercial growth segment also comprised the portfolio company Provel. And due to the distribution agreement being discontinued, as we already mentioned, The company closed its operations and also later filed for bankruptcy. Provel was an indirect investment in the sense that our investment was not immediately in shares. It was structured through loans to a fully owned US subsidiary. So following the closing down of the operations, the value of the loans was completely written off. So that resulted in a financial cost and the reduction of NOV in Q1 of 82 million. And then the limited partnership segment, the smallest, it corresponds to 3% of total portfolio fair value characterized by long-term commitments. I wasn't going to go through so much in detail in this segment, but I'm happy to take questions later. So that rounds up the comments on the financial performance in the quarter. So let's continue with a few words on our share redemption program. As probably many of you already know, we provide a share redemption scheme, or Axie in Swedish, where up to 5% of all shares can be redeemed annually at the value of the latest NOV per share. So we are now approaching the first conversion period, which will be in connection with the Q2 report or at Q2. So from next year and onwards, the conversion period will be at the end of the first quarter. So in a year from now. Not all Fleury shareholders are allowed to utilize the redemption scheme. The majority owner has agreed to not utilize the redemption scheme for several years. And the investors that participated in the directed issue last year are exempt also to participate in this year's redemption, but are free to join next year. So you will be able to redeem your shares at NAV per share, which gives you, as it looks right now, a really good investment opportunity. Again, our NAV per share end of Q1 was 50.56 SEK, and the share price on the same day was 44.20, meaning that at that day, our NAV per share exceeded the share price by more than 14%. There are basically two main reasons for us implementing this redemption scheme. The first one is to provide a liquidity option for our shareholders. As an investor, you might need to realise liquidity from time to time, even if you've invested with a long-term perspective in mind. So the redemption scheme would provide a recurring liquidity option for our shareholders and makes it easier to sell than over the market. And the second reason is also to align the share price and the reported NOV per share. As we said several times, we are active investors, so we help to build the portfolio companies. We use specialist experience, our network. And to support the market in understanding the added value that we bring to the companies beyond just the money invested, this redemption scheme should have the effect to reduce the current discount and to align the share price and the reported NAV per share. So if you want to read more about the detailed conditions or the process for redemption, you can find this on our website, fliri.com. So with that, I hand over back to you, Ted.

Thank you, Cecilia. I apologise, I'm sort of losing my voice a little bit here, but I hope you can hear me well. Let me just say a few concluding remarks and show you the slide that we all are very fond of. It gives an overview of all of our companies, and as you can see here, if the logo is more towards the right within one box, it means that the company is close to moving into the next cell or next stage, if you wish. And again, you can see at the bottom there, the distribution of fair value and the percent of total fair value, where you can see that actually in our portfolio, if you take from phase two onwards, it's quite a large portion of our portfolio that's in either late clinical stage or in commercial phase. but going all the way back to pre-clinical you can see that the tolerancia we mentioned where we're doing the the proposal for a merger and then a delisting this company is indeed right in front of starting a phase one clinical trial so we're excited to try and make that happen it would really be a pity if we do not manage to do that but we we are hopeful that this will go through in the general meetings What I also want to point out that, for example, Lipum has had some very, this is in phase one, they have actually finished their clinical trial and have good top line data. They have been quite conservative in calling it a phase one study. They actually included eight patients with rheumatoid arthritis, six of them that got active treatment and two of them that got placebo. So actually they're getting initial top line data also in patients themselves. Many other companies, I think maybe this is the Swedish conservative nature, many other companies around the world would have called that study a phase 1b2a, as so many do. But Lipum is doing very well and we hope that they also can advance to the proper phase 2. Anacardio, who actually did a very good round right at the end of last year and it was published at the beginning of this quarter, they actually did a round read by Novo Holdings and have now actually completed their study and had their readouts and also starting and have started to dose their first patients in their next study. So they are a phase two company now. We also have good developments in Scintilla that have shown their 18 months data from their phase two study. Mendes has also made progress and has had feedback from both EMA and FDA for for their design and then moving ahead to phase three. So they will be phase three ready, essentially, also having worked a lot on their manufacturer of their dendritic cell therapy, you could say. It's a kind of a dendritic cell-like treatment. And I think that's a very complex manufacturer that has been solved very well together with our company, Northex Biologics, which you can see on the right-hand side in the commercial growth. So, many of our companies are doing well. I have to say Chromaphora, that's in the early commercialization stage, they've also done very well. That's been published around their fundraise with the European Investment Bank, for example. And Nanologica, I should correct what I said on Dagens Industri Television Börsmorgen this morning, that the order that Nanologica got from Asia was indeed for peptides, not for insulin. We're actually seeing a lot of interest in the peptide purification area. As you know, the GLP-1 analogs, for example, they are peptides, and Nanologica's technology can be utilized for that. So I think Nanologica is an exciting company that has a bright future ahead of it. There's a lot happening here and I'm happy to take more questions around this in the Q&A. So I will now pass on so we ensure we have enough time for some questions. But before that, a few events. So annual general meeting is on May 14th in Fleury. I hope you'll be able to participate. Please register in accordance with the notification to attend the AGM, which is on our website. you can also go to the qr code at the bottom right there right now and it will be available on the next slide as well so with your phone you can you can actually register for the portfolio company presentations ahead of it and there will be a link there as well to separately register for the agm if you are a shareholder There will also be a lunch served for all participants at 12 o'clock. For those of you who won't be joining the annual general meeting, if you come for the portfolio company presentations, you'll actually be able to mingle with four of our CEOs that have done those presentations while the rest of us go through the annual general meeting. So an exciting day on the 14th of May. I hope to see you all there. And with that, I'll move into this slide. Again, the QR code at the top right is the same as before.

and i'll leave it over to paula who will facilitate the q a yes thank you chad and welcome to today's q a session if you have a question then please click on the raise your hand icon on the toolbar and i will then activate your microphone so that you can ask your question and i saw that arvid you had a question and you still have it so i'm starting with arvid nekander welcome marvin

Thank you and good afternoon, guys. Thanks for taking my questions. So I have a question on capital allocation. Would you guys seemingly be taking a more focused approach when prioritizing among holdings? How should we expect this to shape the portfolio over the coming one to two years? Are you looking to further reduce the number of holdings, change the weight of late-stage versus early-stage or commercial growth? or doing any significant changes. Yeah, it would be great to get some color on that.

Yeah, thank you, Arvid. So, I think I'll take that question. So, the simple answer is that we will do everything we can for every single company in our portfolio. But of course, if it turns out that it is better to invest in one compared to the other, and we have limited resources, then we would do so. And I think that's what we have. we have proven with a3p so a3p was is indeed a company that we think uh has a bright future uh but when in our calculation um it uh it was worthwhile for us to focus on our core areas where we saw opportunities that we ourselves as a as a team are better able to exploit so uh there's absolutely nothing wrong with with a3p i think uh the owners in a3p will do a great job to continue to build the company and also the team they are doing a good job so If indeed we do do any rearrangements within the portfolio, it will always be in concert with our co-investors, which we have worked very hard with to build relationships with over a long time. And we've actually found that our co-investors have been very understanding of that. Everybody knows that we're heading into difficult times. And that's precisely when you have to do these kinds of reprioritizations. But I wouldn't want to give you a specific one, because that's not the plan. We don't have a plan now to reduce the portfolio specifically with any types of companies. But we really do want to see a focus on talking with big global pharma companies to be able to make co-licensing agreements and so on, or co-development agreements, licensing or co-development agreements, or even M&A, because what I see is that the fundraising will be more difficult going forward in these uncertain times. So I think even more effort on that, what I just said.

Great, thank you. Just a final follow-up, if I may. Do you see any risk of having to revise the redemption programme, assuming that the financing landscape remains as it is in the co-investor willingness as well over the coming one to two years. So how much of a margin do you have baked in into your forecast here in order to be able to uphold the program?

yeah so so we we have no plans to change the program the program change would require a 90 um shareholder agreement anyway in an extraordinary meeting or at a general meeting so so that's we would have to change the article association we have no plans uh to change that we believe solidly in the setup uh we think that uh this will actually this shows that we uh We believe in our valuation and our prudent valuation methodology. Yes, of course, like everyone else in the markets, we have been punished by the general environment rather than specifics. The fundamentals in our companies are really good. But we think, again, we're a long-term investor. that this ability to have liquidity for some shareholders in the long term is a good reason to have a redemption program and that we think that the redemption program will have the effect of sort of aligning our share price with what we think is a prudent valuation methodology. I hope that answers your question.

Yeah, absolutely. Thank you so much, Ted and team. Those were all my questions.

Thank you, Arvid. And we have our next question from Linus Sigurdsson. Welcome, Linus.

Thank you. So I just wanted to dig a little bit deeper into these more difficult conditions that you talk about. Do you sort of see that difficulty looking very different across different parts of your portfolio? And also, are you sort of already seeing clear signs of this? Are there ongoing talks that have broken down in the last few weeks to the current state of markets? Thank you.

Thank you, Linus. So I think it's more than just the last few weeks. Yes, we've seen the market turbulence really heightened, obviously, in the last few weeks. I would say the beginning of the quarter when I was at JPMorgan Healthcare Conference, there was a lot of positive spirit. There were the Scorpion deal, the intracellular deal and so on. so so it was a positive spirit people thought a lot more deals will be done uh but then actually it it didn't materialize as well even before this recent market um turned out now The reason I'm saying more difficult times is because you really, really have to focus on the great, great science. And we've been trying to do that for years. So FLIRI has really picked out companies that are in sort of the creme de la creme of science. And I think Sweden generally has both a good reputation, but a reputation for solid reasons. We have really good research, both in companies and universities. So we can stand out, but we need to, as you say, We need to go out there and speak to people. We have not had any major discussions break down, because I think we have solid science companies to build on. What I'm finding is that people are waiting longer. So they're not broken down, but people are saying, let's wait a little bit and see what happens. So some of our co-investors will say, you know it's difficult with our LPs right now you know to close a new fund for example or to even to deploy you know people are a bit afraid of deploying in the middle of all this because they're waiting for what comes next so I don't think it's a breakdown but it's a little bit of paralysis of action and being contracyclical. And I think that's the best way to make money. We actually have to take action. And that's why we've taken action. That's why we come up with a creative solution for tolerancia. That's why we sold A3P. So we are being active when very many others are sitting on their hands, so to speak.

That answers your question. Yeah, yeah. Appreciate it.

Thank you, Linus. Do we have any other questions? You're also more than welcome to contact us after the webcast at ir.flyt.com. I think those are all the questions. Thank you very much for today.

Thank you, everyone, and happy Easter for those of you who celebrate.