Nanologica AB (publ)

Welcome to RedEye and today's interview with Andreas Bagwani, who is the CEO of Analogica, who has recently released his quarterly report. Welcome, Andreas. Thank you. I think we'll dive straight into the report. Can you briefly go through what the most important points are in the report?

I would say there are three factors. The first is that we again have production that works. We had that last quarter as well. It is extremely important for us that we have a production that is stable and works. We are not satisfied with it, but it works and gives great products. The second is that after the period started, we took another order to the same customer as a GLP-1 customer. That's the second most important thing. And then we got money from a company that I also put my share in. That's the third thing. Right.

And in the report you talk a little bit about warehouse construction and it costs a lot of money. Can you talk a little bit about how much warehouse are you going to build here in the near future and what is the baseline level where you think you will be?

That's a good question. When we produce, we produce a little different products. So now we have some products on the shelf that are mainly for insulin customers and we haven't really started there. What we are producing now is mainly for GLP-1 customers. It's almost the same product, a little different. And there we think that the warehouse construction will be very low because there we will probably sell it as soon as we have produced it. So I don't think that the level we have now will decrease, but it will probably increase, but perhaps not so quickly.

And as you mentioned, you have some different product variants in the law. Can you just briefly describe a little more about these differences?

When you produce our type of product, you get two products at the same time. So the mix between them is determined quite early in the process. And when we set that parameter, it was mainly insulin customers that we aimed at. Then we have become very late, and now it is not insulin customers, now it is GLP-1 customers. So that means that what we have on stock, that was what we made a decision about quite a long time ago. We have not yet started with our insulin customers, but I think it's just a matter of time. And that means that we have some on stock for them. for that type of customer. But now it is a focus on GLP-1, so now and in the future we will produce more towards GLP-1 customers. And that means that we will have a warehouse that will be there, but it will not be as fast as it has been before.

Okay, great. Let's talk about the production, which has been a big topic for the company. What does it look like where you are right now in terms of volume production and efficiency?

The difference between now and before is that we have a production where we produce products all the time. But we are not at all satisfied with that production. There is a lot to do and me and my team spend a lot of time on production. And that is because we see that the GDP market, especially in China, is so aggressive that we think we can sell a lot. And then it is production that has been the narrow sector. But when I say that we are not satisfied, it is in terms of that it works, it gives great products, but we need to make it more efficient. And we can do that too. So when we now have one customer that exists and we might get another one in the near future, then it means that we should just focus on getting as much out as possible and then look at efficiency and profitability afterwards. So it's volume first and then efficiency and profitability. Sounds reasonable.

And speaking of volume, the GFP1 customer in China that you have made repeated orders from, can you give a comment on what volume needs you see in this customer?

If you can guess, and it will be just a guess from my side, we believe that they have now bought for almost 8 million in three different orders since June. And the guess is that they will be on, I don't know, but they will buy every quarter. Will they buy this much? Will they buy more? I don't really know. But I think that somewhere around 4-5 million per quarter, I think they will buy.

And would this, I mean, many will probably see this as some kind of reference and extrapolate from it. Is it something you, is it a way you could look at it?

Yes and no, because some of these other customers are significantly larger than this one. And they are not alone, there are several such customers. But that they buy running, a little less irregular, so then maybe they buy quite a lot in one quarter and a little less in the next, but that it is running. Because for the first time, our silk is in GLP-1 production. It already exists, you produce GLP-1. API, i.e. molecules, with our product. And we haven't been there before.

Super interesting. And if we switch to another customer that you mentioned as one of the world's largest insulin manufacturers, has there been any progress in that dialogue? Is there anything you can share with us?

For those who have followed the company, I have told you a bit about another customer, not just this one, where we failed to deliver on time in January. And that we then lost that customer because we did not manage to deliver, we put them in a rather difficult situation. Now we are working our way back to that Chinese customer. This other customer that we talked about, one of the world's largest insulin manufacturers, when we delivered to them, it took a very long time. We have a little bit of that against us. The need exists, they consume it, they are interested, but I don't know how long it will take us to break it down, or rather to build up the trust again. Because it's that kind of trust that you get once and then you break down. Then it takes quite a long time to get back. We have a ongoing dialogue with them. I will meet them in about two weeks. But it is incredibly difficult to say when it tips over to a first real order and then when it tips over to a return. We know that they have a fairly large consumption of products. But when we get to deliver, it's incredibly difficult, so to speak.

I understand. And the next question will of course be related to the Enlab SIV product, which we have also talked about here. What is the latest development on that front?

We are discussing with them about their next delivery and the prices for it and so on. And there we know that they put quite a lot, the reason they put hard against hard now against us is that they see such huge volumes in the future. And then they see that there will be a big purchase that will be made and then they want a good price. I see it as something very, very positive. They will also meet in two weeks because they have made quite large investments around this product. So that will be a very important product for us. I'm sure of that. What they don't know either is that we will have a number of individual orders corresponding to the ones we have already taken. That is, under 10 million kronor. Maybe spread over a few quarters. And then they will come back to us and say, okay, we will need this much over such a long time. And then it will be with a contract. And then it will be so big that we will share it with the press. But if that happens in Q1, Q2, Q3, Q4 next year, I don't know. But it will be a number, I think it will be two or three businesses that are standalone before you get into a rate contract. And there I should say that There they differ from many others, because many others just continue to buy quarter after quarter or every fourth month or once every six months. But there will be no contract on it, it's order after order. So in that way they are interesting, because then there will be a completely different predictability as well. Right.

And to wrap things up, you have done this mission and you, Andreas, are one of the biggest owners of the company and have also signed to it. So if you take a look at the eyes of the investors for a second, what do you think makes Nando Logica an interesting investment right now?

We operate within a life science trust area. And that means that we sell products to, in our case, pharmaceutical-producing companies. It is a industry that is completely conjecture and sensitive. We also happen to operate within areas for diabetes and Fetma, which are two areas that are very large. It is increasing all the time. So in that way, the macro factors are good. Then we managed to import other products that are not silica-based also to pharmaceutical-producing companies. And that combined makes it that even if we have a history of having problems with production, we have now done our first business and they happen almost exactly in connection with emissions. It was not something that was conscious, but as I have always said, it is difficult to say when it will come. It will come, it is difficult to say when it will come. And these factors together make this a fantastic investment. It's just about being sustainable, and that's also why I've chosen to invest in the company I've been the CEO of for a long time.

That's right. Thank you very much for this update on the company. We look forward to reconnecting with many of this in the future.

Thank you very much. Thank you very much.