Nanologica AB (publ)

Hello and welcome to Redeye and this VD interview. Today we have Nonnologica's VD Andreas Bagvani and we will talk about the Q2 report that the company released last week. Welcome, Andreas. Thank you. Can you tell us more about the production in the big factory in the UK? Is everything going according to plan? And how is the capacity to meet demand on potentially larger orders?

There are many questions, but I thought that production is my favorite subject, so I would like to publish the text about production. As everyone knows, we reached a pretty big milestone in the beginning of May, when we first approved products from our large factory in England. And for those of you who follow the company, you know that we have not been satisfied with the quality. We have had a step that has failed for us and we solved that so that we got out. But we still run with quite low capacity precisely because we do not want to risk the product quality. And I would like us to just bomb on with the capacity that the entire factory has, but we don't do that anymore. I can easily say that I put 80% of my time on production. And that means that we have a number of initiatives that we have initiated and that we are running now and that we are running over the summer, which means that I hope that we will be able to go full and then also expand the capacity to after the summer. For those of you who are familiar with the company, we have a goal to be able to convert 100 million under 2024. And then you have to be able to produce for that. And we think we can do that. The factory is very, very large, so the theoretical capacity is very, very high. But now I would say that we are held back by the fact that we are quite cautious, we run with reduced speed, we run with smaller batches and perhaps not as large as we would like to do and as the capacity is just to ensure product quality. And there is a lot, if you keep doing that, there are a lot of two steps forward and then one back. But now we have taken quite a few steps forward. I would say that it is a monumental milestone actually to be able to say that we can approve products from that factory.

Interesting, and in the Q2 report you mentioned that NLAB Saga is now included in the production with a customer in Latin America. Could you explain the significance of this?

I would say that it is very, very important, and it is important for a couple of different reasons. I would say that, first of all, it is a customer who has chosen to put it into production to clean diabetes products. Not just test, but clean diabetes products. We have not been there before. People have tested in labs to clean diabetes products, but this is in production. On the other hand, it is a very good example of what we believe will give the business, namely that we help the customer. They have a problem that is not directly related to our product. But we help them with those problems and then they feel that this is a very good supplier we want to work with. And then we first get a slightly smaller order and then we get a slightly larger order that we hope can be translated into recurring orders. So I would say that it is important for these two reasons, both in the way we take the business, namely that we help customers with the problems they have and that they go into production and that they will use it continuously.

You are waiting for a significantly improved cash flow under H2O, with lower costs in drug development and increased sales. Could you tell us a bit more about this?

For those who have followed the company, you can see that we have, in my opinion, of quite high costs during the first half of the year. But it is driven by a few different things. On the one hand, we have had quite large payments, which is actually also visible on our balance sheet, that we are building up a corresponding stock in a value. The money has been paid out during the first half of the year and we do not have such payments during the second half of the year. In addition, we have now down-prioritized drug development and that means that we do not have any employees there, it means that we lower the costs from them in the middle of Q3. And we also expect to have revenue. So it's a combination of all three of these big positions that we get a significantly improved cash flow. And when you look at how we stand and walk from the middle of Q3, there is not much money that needs to come in for us to be able to balance out.

And is there anything else from this report that you would like to raise?

I would like to highlight first and foremost the fact that we have released a product. And even if it's not straight forward and we're pumping 100 million right now, we must not forget that we come from a history where we started in 2019 and it's only now that we've released a product. It's way too long, but now we're really there. And I think that's a big kudos to the whole team, but above all for those who work with production, led by our CEO Anna-Karin Renström. It's been an enormous effort and to get that confirmation, when we got it, it was a bit like we didn't think it was true. But that's what it was, and it is. And it's also something you notice in the customers. There are many customers who have picked it up, who have tested our products on a smaller scale, who have picked up that we have actually been able to produce on a large scale. It's not as straight forward as we would like, but we have taken a huge step forward.

Interesting, and I wonder if you could tell us a little more about the market for GLP-1 analogue and what potential you see there?

Yes, it's very exciting. Our product is used when cleaning diabetes drugs and GLP-1s are from the beginning diabetes drugs, glucagon-like peptides, which are now approved for overweight, which is a much, much, much larger market. So if you look at the market development, you have this very large number of diabetics that will increase. We believe that there will be a strong focus on the cost, that is, the price of insulin. And that will mean that you will want to have as good productivity as possible. And there our product Enlabsaga is very good. When it comes to the glucagon-like peptides, we can already see how they are increasing. In the Nordic countries, the most famous one is called VEGOVI. And it is cleaned in the same way as insulin actually. And then you need our type of product. And we see a huge increase in that. And if you look at maybe 10-15 years back in time, we think that it will just increase and increase and increase and multiply quite simply. And it will not only be good for Nordic sales and stock development, but somewhere they have to take this cleaning media from. And then it really only exists Two companies plus us. So a part of this volume will end up with us. And that means that this enormous volume that will exist for a very long time in the future, purely with statistical similarity, will end up with us. And we also have a very good product, which means that you can clean efficiently. So we look very very positively at our position now when these glucogonic peptides are just increasing and increasing and will continue to do so for a very long time.

If you could give some final words, what expectations can investors have of NonoLogica during the rest of the year and next year?

Our shareholders and investors have been very patient, so we have to thank them. Now we are finally there, we can have production that works. Even if it doesn't go as fast as we would like. I think you can expect, especially if you look at 2024, you can expect very large sales increases. Then exactly when it comes around the second half of the year, it's a little harder to say. But that there will be large sales from us, considering that we now have products out there, even if we run with reduced speed, and that we have products that are in demand from our customers, and that the market is constantly increasing and will continue to do so for a long time to come, it means that I think it looks very good from now on.

Okay, it will be very, very interesting to follow this. Thank you very much, Andreas.

Thank you very much.