Nanologica AB (publ)

Hello and welcome to today's conversation here at Redeye with NanoLogica's CEO Andreas Bagwani who has recently released his quarterly report and also a press release. Welcome Andreas. Thank you very much. I think before we go into this press release you released on Wednesday, maybe we can talk a little bit about the report. What was the most important thing to take with you from it?

I would say that the most important thing is that we have sales and that sales is almost as big as last year. But maybe even more important is that we have worked a lot with production and production challenges have been what has kept us back. And now we are a little clearer in that we are working very intensively under Q1 and Q2 here, which will give results Q3 and forward. So I would say that it is the two factors that are the most important.

Right, and if we look at the order that arrived on Wednesday, you communicate that you have delivered a production order to a customer in China for about $180,000.

Can you tell us more about this order and your expectations of this customer? This is very similar to what we had last summer when we delivered about the same order, I think it was a bit smaller, to another GLP1 manufacturer in China. And I think that you can expect a similar scenario, that they might buy a little more, buy a little more, buy a little more. But this is a much, much bigger customer. And this is also a customer who evaluates more products than just this one. So I would say that strategically, if the first one was strategically important because it was the first one, then this one is much, much, much bigger. And that's why it's important.

When you say evaluate more products, are you also talking about Enlab, Idun and Siv, or is it a specific saga?

No, it is mainly Enlab and Idun that could fit in their workflow.

I also read in the report that you have delivered even fewer production orders on insulin and evaluation orders for GLP-1 and under Q1. Can you say something about these orders?

It's hard to say what they will take away, because some of these evaluation orders are very fast, like this customer for example. They have tested on a smaller scale under Q1. So it has gone pretty fast there, from the fact that they tested, it's good, and then they go on. Others are much slower. It can take a couple of months, like in this case, until it takes 1-1.5 years. So it's very difficult to say about those evaluation years when they will take over. I think it's very difficult to say anything about those evaluation years.

Would you say that increased production and production stability is the key to pushing some of these export orders to production orders? Or how should we look at this dynamic?

Definitely, and what we have encountered now in many places is a mistrust towards production for inexplicable reasons. We have had problems. We have put a lot of energy into Q1 and Q2 and we expect that sometime during Q3 and forward we will not have these, because I have said that the production works, but it does not work particularly well. I think we will take a very big step forward from Q3 and forward. in production, and that we haven't had production. It has led to, all the way from people saying, should we add one more order? Is it possible that you deliver to, we have had some customers who have said that, between the lines a little bit, that you have to and get to a more stable level before we can take the next step. And now that you have a part... I just want to say that even though we have proven that the product from our production plant keeps a very high and even quality. So there are no... It's not a question mark about the product, it's just about our ability to deliver.

Now that you have a bunch of evaluation orders in progress, do you have anyone who has crystallized as the credible one to put a production order, a next customer?

I would say that a follow-up order from this one, or a follow-up order from POSIV, or a follow-up order from the customer we already have, is perhaps the most reliable in the current situation. We have some more that might be in order to be able to order a little bigger, but I would say that it is mainly those customers.

Before we get into the production, I'm curious about Enlabsiv. You wrote in the report that the customer needs a new approval due to the restructuring. Do you think they need this approval before you wait for an order from a customer?

No, that's what they have communicated to us. But on the other hand, it is important that they place recurring orders. I think that is very important. But I would say that they don't need that to put in the next order. I don't think so. What is positive when you look at them is that they take this very seriously and put a lot of resources into it. But also, if you look at the scale that they want to produce and what it means in volume for us, it's enormous volumes. But of course it takes time and it's very difficult to say before it comes. Will it come under 2025? Will it come in the beginning of 2026? Will it come at the end of 2026? They don't really know that themselves. And they are quite transparent towards us that we don't know that right now. But that there are enormous volumes in the long run, there are no doubts about that. Because I have been in their facilities and looked and there are big things and many things.

Great. And if we go back to the production that we are talking about here, you write in the report that you expect improvements that will have a material impact on Q2. What have you improved? And can you also quantify what this means in terms of increased production in terms of potential sales and so on?

I have previously said that we have a production that works, but it does not work well. It is mainly one or two production steps that have not worked well. And then we have changed equipment in one production step. The change started in Q1 this year and will end at the end of Q2. And then we have a completely new production line on that production stage. That means that what we have sold now has been something that we have had anyway, like we have produced before. So it's a huge transition and a huge change to the positive. And then we've had one equipment that we haven't had time to prioritize. It's simply a high-capacity equipment that hasn't worked so well. And now we have, not through any trick, but through very, very hard work from us and our subcontractors, made it work. It has such a high capacity that it doesn't have to work perfectly, but now the limit starts to work well, I would say. And that means that when the two are as they are now, it releases quite a lot of capacity and that means that we can go up very much in the production phase. I don't want to express what it is in money, but we will be on a completely different level. And it's also on the level that we will have predictability, which we haven't had so far. That's why we haven't been able to take certain orders, because we didn't know if we could deliver.

Earlier you mentioned that the GLP-1 product you are producing is going very fast. Do you think that this will be the case in the future? Or will you be able to build some storage on it?

No, we don't think we will build any storage. That's what we think. It might take a quarter or so, but it won't be long for it to be on the shelf. Now, as soon as it's done, it's out.

While you're here, you might be able to say something about the report. How do you see the ongoing bustle in the US? Do you see the impact directly on your business?

I'll start by saying that I have no idea what it will be like. Our exposure to the US is quite small and it is clear that our customers, who are not in the US, sometimes sell to the US. It's not a huge amount, they do it. So I would say that everything else is the same, but the impact right now is quite low. And you should also add that our competitors are one that delivers from Europe and one that delivers from Japan. And it's the same for them. There's no one who produces our type of product in the US. So there's no one. It's the same for everyone. So again, no idea. Right now, we're not particularly heavily exposed.

To wrap things up, let's talk about the funding. You had SEK 28 million in the cash register and it will probably be a limited contribution from Teknisk Option. How does the funding look like in the future?

We will get some money from customers. If you look at our burn rate, which the company has, which has fallen somewhere around 10-11 million per quarter. Then the cash register is quite far from having significant sales. We had almost equivalent sales during Q1. And of course, it's a situation that we haven't been in before. So I would say that in that way we don't see any need for funding right now. But that can change and we have a macro situation that is completely crazy. It's very difficult to say if something will happen that makes people unable to buy. Now we are mostly selling eastward, but you don't know what will happen. So I would say that right now we don't see a need for financing, but of course, given how the times look, it is difficult to be too clear about the future.

I understand. It sounds like a lot is going on and we have an interesting second half of the year to look forward to. We hope to be able to connect with you and talk more about it in the future. Thank you very much. Thank you.