Nanologica AB (publ)

Welcome to Redeye and today's interview with Nanologica and CEO Andreas Bhagwani, who is with us in Lina, down in India. Welcome, Andreas. Thank you. You released a report here just recently. Can you give a little more color to the report? What are the most important parts?

I would say that the most important thing is that we have new customers coming in. We have not reached any milestone yet when it comes to production, it remains to come. And then it is interesting to just read the cash position. We had a lot of revenue in Q1 and when they come in, then the cash is largely neutral because that type of revenue is what we need to go around. So I would say that good customer activity, not yet finished with production, completely in the cash position.

We can go directly into production. You mentioned in Q1 that you were waiting for essentially improved production after Q2. You also comment on this in the report, but what is the status right now?

The status is that the installation work on the new equipment that we have carried out since the end of last year is now complete. Within a week we will start the first batch with the new equipment and then we will run a couple of batches before we feel that it is stable. We have taken another production step in this equipment, so we are not really worried about that. But before you hear me say that the production is rolling steadily, we want to have run a few batches. But the idea is that the first batch should be run as soon as possible.

Will there be further adjustments under H2 or further improvements under H2? And can you mention anything about your insight into the delivery times at the moment?

That's a really good question. I would say that with the facet in hand, I should be a bit defensive, because it's often things that have support. But I would say that under H2, it will stabilize and be good. Now we have done this important installation. In theory, it could be stable from the end of August, but it's hard to say. It's usually the adjustment that should be done. When it comes to delivery times, it means that we get a little sharper in them. As it looks now, we can deliver the first products here in August. And then the question is, when do we run the next batch? Do we run it directly? So right now it looks good, but the experience is that there are things that can affect. So we are pleased with what we see now. And therefore I think that maybe I would have hoped that everything would be stable Yes.

During Q2, you gave a new customer in the USA and a new one in China. We can start with that in the USA. Tell us more about this customer and what needs you think can be found there.

This is a customer who has tested our products before and now they had a project where it suited well to run our product that they have qualified before. Just in this case, it's hard to say what this can give, because there are actually two possibilities to continue here. One is that you get more and more of this project, and the other is that you get other projects from them. And here I don't really have, they are not so transparent about it, so we don't really know if it will be the next order from them soon and on the same product of their products, or is it further manufacturing, or is it so that we get more projects from them? I don't know. When it comes to the Chinese customer, I know a little more, because we have been in contact with them for a long time. It is a very important customer for us, because they have production on a very large scale. So there you can expect that there will be more orders from that customer. So there is a little more... And they produce more than one of the largest producers of GLP-1 drugs, the Chinese company.

Now you've come to the point, but I still want to ask the question. Both of these will be delivered under Q3, but what is the likelihood of following production orders from these customers during the second half of the year?

I would say that both are good, but much more uncertain about the American customer. Much more confident that it will come in the near future from the Chinese customer.

If you look at the results for the quarter, you can see that the law of change is low. Can you comment on why?

Yes, that's because we haven't sold that much and we haven't produced finished products during that period. So that's why it's still there. And the reason we haven't sold more is because we haven't had the right products to sell.

Another post in the balance sheet that stands out is that there is a large sum of previously paid costs and accumulated income of approximately 30 million. Can you comment on this figure a little?

Yes, we have a payment plan running with Sterling, our major contractor, which does not necessarily have to do with the deliveries. So we have a payment plan that looks very promising, but it also means that there will be quite big swings in the balance sheet, since there is no 1-1 ratio. And both them and we think that it shouldn't be like that in the future. But as we get more and more stable production, we think that it will be a little more as usual. What we sell, we will buy. And that we don't have these big balance sheets, above all. But as long as it will be like that, I think it will be like that at least throughout the year.

Yes, and a little on the same subject, you also saw in the report that the cash position is relatively unchanged from the previous quarter. So how do you think you should look at the liquidity situation before H2?

It is quite clear that with the fairly limited, but still burn rate we have, it requires income in similar or larger amounts. We write very clearly in the report that it requires revenue and right now it looks like we will be able to produce a lot and then we will be able to sell a lot. But of course, if there are delays, which I do not hope, but which there can be, then the cash position will be different. And then you might have to look at additional financing. But I would say that we don't see any financing right now, but it depends on the revenues.

Yes. And I think it's interesting that at the end of the VD audit report you talk about a refined by-product from the large-scale production of Enlabsaga. Can you develop around these products and what these types will be?

When you manufacture these types of products, you have a couple of main products and several side factions. One of them is It will simply be smaller particles. We have previously had a column business, that is, we have sold analytical columns that are quite small. But of course, the reason we are not in that space is that it is a fairly competitive area. But selling to those who pack columns is a good idea. That's what we've been doing all along, but we've been so focused on making the big production work. So when this has started to roll a little bit, we've looked at how we're going to adapt what we actually have on the shelf to a product that can be sold. So it's quite simple that you sell smaller particles in smaller volumes at higher prices, and that's a good complement that will actually affect the gross margin of the entire business. because you are selling more of what we have produced. It requires further processing from our side, and that is why we have not looked at it for now. But now we have two or three customers who have asked for it, and now they have evaluated it, and now we are more in commercial discussions with them than anything else, and then we thought it would be good to talk about it. So it's a very interesting complement to the products we already have on the shelf. Att gå från att man har en potential till att man ska göra en produkt som ser likadan ut hela tiden, det har vi gjort tidigare men det är ju ett ganska grannlaget arbete och det har vi gjort under våren, kommer fortsätta under hösten så den här försäljningen kommer ju förmodligen komma igång under hösten.

When we are talking about products and product development, is there anything you can share with us that has happened with Enlab Idunn? I want to remind you that you have mentioned earlier that it is expected to become commercial here during H2.

No, not really, but we have a few customers who have tested it with very good results. Then when they start buying, it will be difficult to say, but what is interesting about it is that We sometimes ask, how are you unique to your competitors? We have a very good product, but we have one product of our competitors that is quite similar to ours, so we can't really say that we are unique. But here it is really possible to say that we are unique, because there is no one who has that offer. silica producers and those who produce other, softer media. And we are the first to break that. And we also notice that there is a fairly large interest in it because it is also bound by traditions. Insulin producers have used both and for a long time, but GLP-1 producers have not done it. And that gives us an enormous opportunity. And we already have one great case Yes. Yes. Yes. Yes. Yes.

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