SenzaGen AB

Welcome to SenseAgent's presentation of the first quarter of 2025. My name is Rodnar Löhn and I am the advisor at Halvarsson. I am the CEO of the company, Peter Nellstedt, who will soon start his presentation. After that, we will start a Q&A session that I lead. There will also be an opportunity for those of you who are watching to ask questions if you think about 4.5. Peter, welcome.

Thank you very much, Rodney, and welcome from my side as well to the Q1 presentation. I am the CEO of Sensagen, and we are building a future where what we did with animal testing earlier can now be done without animal testing, without animal-free methods, which we are building on high-tech solutions that we have developed. And this presentation will focus a lot on quarter one, how we have delivered financially. We will break down a little bit this performance in quarter one to how Guard, which is our core business, goes. And how we work to strengthen VitroScreen as an acquisition we carried out a couple of years ago. I will then, for any new investors, describe Sensagen and how we were going to grow in the future, especially with focus on our R&D pipeline. But to go back to quarter one. It has been an incredibly highly active quarter from our side. Vi har jobbat mycket hårt med vår försäljningspipeline och våra R&D-projekt och byggt och fått till många byggstenar i bolagsbygget för framtida tillväxt. Men vi har också verkat i en turbulent omvärld och det har i viss mån påverkat oss. If we look at sales results and Q1 results, then our sales growth is somewhat lower than we expect ourselves. We are back 5% in Q1, and that is due to the fact that we have a slightly different channel mix. We also have a relatively high volatility on the market, which we see has led to the customers taking a little longer to decide for larger investments. And we see that larger projects have become a little late in our sales pipeline. Then we have also had currency against wind. We have basically all our sales in euro or US dollar. If you look at our sales in constant currencies, we have an unchanged volume of sales. It is positive, however, that we have a very strong gross margin of 75%. Den starka bruttomarginalen drivs dels av kanalmix, men den drivs också av att vi har jobbat effektivt. Vi är mycket duktigare på att titta igenom hur vi jobbar med våra tester på laven. Vi har också jobbat med prissättning. And 75% is unchanged today compared to the quarter a year ago. But 75% is historically a fairly large figure, since you can see that the historical one for the whole of 2024 was 67%. And in this situation, where we are expanding the company, we have still managed to keep the costs under control, also with regard to the currency against wind, which we of course also had on the cost side. Vår kassaposition är fortsatt väldigt stabil, bolaget är välfinansierat och vi har 34,7 miljoner i kassan. This is what the total quarter looks like for the group. If we look a little closer at our core business, Guard, we have an incredibly stable core business and we also have a very good customer acquisition. We achieved a sales growth of 3% with Guard, which is lower than what we have had in the last quarter. But it depends on a number of factors that I will go into. However, I also want to mention that even if the sales growth was 3%, we got 10 new customers in the quarter and we continue this trend that we put new customers to our existing customer base. And of the 10, we have 4 large international companies, which is part of our core strategy to attract. We had no big direct sales orders from the customers, but the sales consisted more of, what shall we call it, bread and butter, smaller repeat orders from stable And even new customers might have had a slightly lower volume on the test business. And we see that this is the sign that I'm talking about, that we have a slightly more uncertain environment. Bigger projects take a little longer time for customers to execute on. If we look at how the mix looks, we have 81% direct sales and we usually with Guard are at 91%. Vi har en lite ovanlig affär. Vi har gjort en licensaffär på nästan 800 000 kronor. Det motsvarar 8 % av försäljningen. Det är ett stort forskningsprojekt som ligger bakom detta. Normally, we have a license deal of 1% in the company, so that's quite a lot. It affects the turnover, you could say, since the license income is lower than if we had sold directly. It's about a factor of five in between. But of course, it affects our profitability very positively. It's not something we would have had to invest in and sell. Then of course we are very happy that we have strong customer loyalty. 84% of the revenue comes from returning customers. 86% was 84% a year ago, so it is constant. The gross margin is 74%. Den är högre än den brukar vara, dock inte högre än vad Q1 var och att den är högre än den brukar vara beror på att vi har den här licensintäkten som bidrar med ungefär 2.2%. Our sales position in the industry is incredibly strong. We were at the world's largest toxicology conference in Orlando, where we presented our company. We also presented our customer cooperation with international customers such as Clarence from France and Unilever. And this has led to a very strong interest right now. And we also have many more high-value offers. And we see that this is building a very solid base for growth in the future. Maybe with a heavy weight on the second half of 2025. The example on the right shows our business model, that we start working with customers, contact, discussion. During a period of 60-80 months, it leads to our first order and then we have received a design in from the customer and we get a repeat business where they use Guard to evaluate new products. This example is a real customer example, we cannot tell you about it, but it is a top 20 skin care company in the world. Talking about customers, we have a very nice customer portfolio. We work with basically all the big cosmetics companies. We work with big chemical companies. We work with big medtech companies like Sonova in Sweden, for example. And it's proof that our technology works and meets customer needs that you can't achieve with other technology. The second part of our company is Vitroscreen, which we acquired in 2021, where we, at the end of 2024, made a change in the leadership of the company to get a greater commercial focus. We have now, under Q1, recruited a new sales organization. The individuals we have employed are also fully active. They have undergone product training both at VitroScreen and at Senseen here in Lund. And the sales in Q1 remains at the Q4 level. Men vår orderingång är signifikant högre än vad försäljningen är och vi går nu in i kvartal två med en betydligt högre orderbok än vad vi gjorde när vi gick in i Q1. Så vi ser starka tecken på att bolaget håller på att återhämta sig och att vi har gjort rätt saker. Det avslutar kvartal ett presentationen. Jag ska visa några bilder nu om Sensagen. Vi är ju ett som vill leda skiftet från djurtester till djurfria alternativ inom någonting som heter toxikologi och efficacy, det vill säga säkerhetstestning och effekttestning av nya produkter. Vi erbjuder högteknologiska djurfria testlösningar som supporterar hållbarhet, etika och etik. På det sättet bidrar vi till att reducera djurtester. Vi får till säkrare och mer hållbara produkter på marknaden. En del av vår portfölj kan också användas till att man säkrar upp tillverkningsmiljön och gör det bättre för medarbetare. Vi är en grupp som nu består av 36 medarbetare. Vi är 21 stycken i Lund, där vi har utvecklat GARD-testet, har väldigt stark expertis inom immunologi, men också urfri toxikologi, och har vår testbusiness. Vi har ett dotterbolag i Italien, VitroScreen, i Milano, där det är 12 anställda. I tillägg till att ha toxicitetstestning finns här även effektstestning. And then we have a consulting company called ToxHub, based in HUM. And ToxHub is an important part of our business model, where their consulting can help our test businesses deliver. Vi jobbar på en marknad i en stad i hög tillväxt. Den totala marknaden för effekttest och toxicitetstestning uppskattas till 13 miljarder dollar. The addressable market is estimated at 3 billion dollars and the market we can earn today is half a billion dollars. So given our turnover, there is a lot of potential for the company to grow further. Marknaden i sig växer också mellan 6-9,5 % per år i perioden som kommer härnäst, 2024-2028. Drivkrafterna är starka för att den här tillväxten ska fortsätta. Vi har vetenskapliga innovationer. Vi har regelverk och myndigheter som stiftar nya lagar, att djurtester förbjuds, som gör att vår bransch går från nice to do till must do. We have cost efficiency and we have increased social engagement from companies, that you don't want to do test if you don't have to. Europe and North America account for 75% of the market. That is also our focus today. And we are quite industry agnostic. Our solutions are used in cosmetics, medtech, chemicals, drugs and also in food. För att växa på den här marknaden så investerar vi i R&D. Det har vi gjort historiskt. Vi har ju tagit fram vårt test, fått OECD godkänt och varit lyckosamma med. Men vi fortsätter. Vi jobbar med att få vårt dose response som är vårt riskbedömningstest. To also get the OCD approved would mean many benefits for us since it would be easier to use the test in a regulatory context. We want Guard Skin Medical Device to become an ISO standard so that it is the standardized way to evaluate biocompatibility and skin allergen risk with a new Meditec product. On VitroScreen, we have a technology platform called Aura, which is organoids, which we can shred to customers' needs, and thereby also shred various effect tests. And we also have a project ongoing where we are looking at whether we can improve our analysis platform to reduce our direct costs, but also make it a little easier to get better license sales in the future. Hur går det för oss med våra tillväxtinitiativ? Jag kan rapportera att aktiviteten är mycket hög. Det går jättefint. Vi har implementerat, bredat vår testportfölj genom att implementera ett nytt test i Milano som heter Epicens A. Vi är först i Europa med testet. Vi är faktiskt först i världen utanför Japan med att implementera det. Vi har redan orders och vi håller på att genomföra dem på vårt labb just nu. And we see that there is a big demand, that this is a very good complement to GARD when it comes to regulatory testing. Then we work with and get GARD as a medical device standard in the ISO standard. And now we have carried out our in-house validation and we have fantastic results. which we will now present to the ISO group, and the next step will be to continue with a ring trial, as it is called, where we prove that the test works on three labs independent of each other. During the quarter, we also saw that the FDA made a statement about trying to avoid animal testing in the development of monoclonal antibodies. We see it as incredibly positive that the FDA and the pharmaceutical industry are paying attention to this and putting such strong signals into practice so that we can get a transition to animal-free methods, even within the pharmaceutical industry. Fokus för oss. Vi har en stark kassaposition. Vi ser att bolaget har potential att växa väldigt kraftigt organiskt. Så vi kommer att fortsätta driva försäljningen genom att influera industrin med vetenskap och innovation. Vi kommer att bygga ut vår kommersiella organisation, ytterligare något. And this commercially focused organization that we have recruited to Virtuoscreen will now be released on the market. And at the same time as we do these commercial initiatives, we continue with R&D, expand the test portfolio, run these regulatory approvals so that we lay the foundation for taking the next step in the growth journey. Vi har gjort två framgångsrika förvärv. Vi har en agenda som innebär att vi tittar på bolag. Vi vill förstås att det här ska passa och kunna bidra till vår tillväxtresa. Då får vi återkomma till dem när en sån möjlighet dyker upp. Med det här starka marknadsintresset och de starka aktiviteterna, höga aktivitetsnivån, så har vi lagt en väldigt solid bas för att få en mycket högre tillväxt andra halvan 2025. And then we'll hand it over to a question time.

Thank you, Peter, for this. We will also open up for those of you who are online. But I have a couple of questions I was just going to ask first. You talked about the fact that the decision-making process is longer. And it refers to market anxiety. It's easy to agree with that, so it's been pretty easy. What makes the decision-making process take longer? Has it changed its meaning at the end of the day?

As you say, it takes longer. We think it's because of the worrying value. And that you're cutting out investments and focusing on what you absolutely must do. We've seen a difference. In the beginning of this quarter, we had a fairly small sales pipeline. We had very few projects with greater value. What we see right now is that the salespipeline looks larger, but there are also many larger projects. So we see it as a sign that customers have started their inquiries for larger projects.

Thank you. And the channel mix in the quarter, as you also commented on, has changed quite a bit. Will this channel mix exist, or is it a temporary effect, or how should we look at it?

Det kommer att vara en stor variation mellan kvartalen på Kanalmix. Vi kommer att ha huvuddelen direktförsäljning under överskottlig tid. 8% licensförsäljning är väldigt högt. Vi har ingen så stor affär. in the pipe right now, so it will go down in the next quarter. But over time, we expect that the license deals will be a slightly larger part of the revenue, because we think it's a very good way to scale up the deal.

Yes, exactly, and that's what I was also referring to. It's less work for you, and you also commented that the margin is essentially higher. You don't have any costs related to that, so the margin is much better. So is it desirable that you scale up this business?

Well, that's right. The margin is in principle 100%. It is a license cost that we deliver to the customer, which is based on the number of GARD tests they have carried out. So we haven't done anything in our lab and we haven't done anything in our sales organization either. And an important part is that we can also reach out to customers that otherwise we wouldn't have been able to sell to.

And when you discussed your pipeline in R&D, you also mentioned this OECD process. Can you elaborate a little on what it is about and how we should think about the timing around that process?

I can mention our two projects that are the most concrete right now. So part of it is the dose response test for risk assessment. And there we want to make a similar journey we have with GuardSkin, that GuardSkin dose response also gets OECD approval. And there we are in the first step. We are working with the EU's expert organization called ECBAM. So they have done a first look at our file. We will complete with data to show that the method... A stable inter-lab is our next step. We believe that in 2027 we will have a approval for the method. It does not mean that nothing will happen in 2027, but we will have to work with the authorities to show it in different steps. What is a little closer to hand is that we are also working to get an additional approval for GuardSkin. We got approval for GuardSkin in 2022. But now, for a broader application in skin allergies, we have the opportunity to get this additional approval. And I think we can get that already this year, the second half of the year. And I think we will also have a certain impact on sales in a positive way.

Good, thank you. Do we have any questions from the audience? On the square five, you are in.

Inga frågor från Telkom just nu, så jag lämnar tillbaka ordet till dig, Rodney, för skriftliga frågor.

Ja, vad bra. Vi har en från publiken här. Sen sett igenom alla fördelar som produkt och många stora internationella kunder, vad är då den främsta orsaken till att det trots detta tar tid att komma upp i lite större försäljningsvolymer?

I would like to mention that we have grown quite strongly in the last few years. We have grown 300% in the last three years and have made two acquisitions. We have had a very strong organic growth. With that said, we are also a company with high ambitions and we want to grow stronger in the future. But we think we have had a good growth compared to where the company is right now. The reason why we are interested in a strong growth right now is the reasons I have prepared for this quarter presentation. We have negative currency effects and we have also had longer decision processes with our larger customers when it comes to larger projects.

During the last period, you have included more sellers. And I know that your sales organization is a very important part, because they combine both commercial expertise and product-based expertise.

How has the start been for them? It's an important thing that you highlight, that the sales organization is incredibly important to us, but it's also important, not only that they are good at selling, but we also have to have a certain scientific expertise and product knowledge to be able to talk to the customers in the right way. We have recruited two in Italy and they have had a very nice start. They started in February. We have trained them in Lund, trained them in Milan. They have written their plans and We have already had a first round with all of VitroScreen's existing customers and talked to them. And we are, so to speak, on the first round of sales meetings. This will, of course, lead to more concrete business proposals. And we have already seen that the sales pipe has doubled at VitroScreen. And we have also seen that the order entry, as I said, was higher than what the sales meeting was. So we see signs that this works and that we have found the right people. Yes, that's good.

As far as VitroScreen is concerned, you have also worked on the leadership there. How has it gone for the new leadership?

What we needed to get in place was a more commercially focused leadership, which is also more aligned with the strategic development of the company. The recruitment we have done has been very good. We have a very competent, competent lab manager in place, but also a really good business manager. And in fact, it is a reason why the gross margin looks a little better in the QE than a pure consequence of that, because they have worked a lot with just the effective processes internally and internally for lab work, which is also important.

We have a written question here from the audience. It's actually two somewhat similar themes. First, Magnus Stenberg from KMS. How do your competitors develop, probably also in relation to you?

We are in a industry where our customers and suppliers are sometimes competitors. We see the total growth of the market, if we take that, we aggregate it to that they grow by between 5 and 10 percent over this period. That's about what you can say. We have a lower growth than what we've had historically.

And what about the order intake? How does it compare to the same time period in 2024? That's Jacob's question.

The order intake is higher this year than it was exactly the same time period a year ago. But not significantly higher.

And here's one from Axel Roland Karlsson, who asks, when do you think the company will reach break-even?

Yes, it will happen relatively soon. You can look at our figures in this quarter. 13.7 million in turnover leads to minus 1.3 million EBITDA. And that means that we need to be around 15 to reach break-even. That's a figure we've reached historically, and I think we'll reach it pretty soon again.

Because you have a very good scalability in the business. You can see that when you look at your historical figures that you keep the costs quite intact even though the sales are going. So you have a platform to build on.

Yes, you can say that. And you can also say that if we have now managed to lay the basis for better growth in the second half, then this whole year can look quite interesting.

And as we stated initially, it has been very turbulent on the market and there are reasons to believe that this can happen for a while. But if we go down to Sensagen's business specifically, what risks do you see in the future?

Det är alltid svårt med riskoverordning som vi dessutom ska kunna kontrollera men vi jobbar ju med forskning. Vi jobbar med forskningsintensiv verksamhet. Det går liksom inte riktigt att beställa ett resultat man vill ha utan man får försöka skapa sig så bra förutsättningar för att man ska få ett bra resultat. But there is a risk moment in that we may not achieve the results that our customers want or that we ourselves want with our R&D project, which can lead to delays. What I can say is that we never give up, so we have always managed to deliver, but sometimes it has taken a little longer. That's one risk moment. Then the other is that we are, like many smaller companies, in the stage of scaling. We have to find the right people. And we have to get the organization to work. And there we have, of course, a risk moment. And we work very intensively with putting the right culture in the company, the right processes, but also make it an exciting company to work on.

Another strategic priority that you have talked about is M&A. And you have made two acquisitions in recent years, Wittelskin and Toksad. What lessons do you have from those acquisitions that you can bring into the next acquisition?

No, but we have had an enormous knowledge base that we had worked for many, many years to achieve when it comes to customers, markets, new technologies outside of Guard that have entered the company. So I really take it with me that acquisition can lead to accelerating the development of the company's market understanding extremely quickly. I take that with me. Then you can also take with you a little bit about the right management at the right time. before and after it's time to make the change and have very clear discussions about it.

You have also been very good at cross-selling. I don't know the exact figure, but it's around 25% there. In a fairly short time. What is the key to that?

Yes, that's right. 25% of what... Tillväxt förra året, utgjord som kortförsäljning. Så att det stämmer. Vi har jobbat intensivt, vi har utbildat varandra och vi har också gjort vitroscreen-förvärvet för att vi visste att de produkter, tjänster och erbjuder passar med GAL. Så det är väl inte så mycket svårare än så, men det brukar vara svårt att få till. Men jag håller med dig, jag är nöjd med att vi fått fart på den delen av verksamheten.

En sak som jag har funderat på är att ni saknar finansiella mål. Är det nånting som ni funderar på att införa?

Ja. Sensegen hade tidigt i bolagets historia sådana målsättningar. Men jag kan från min sida säga att trots att de var satta i en tid då det var svårt att uppskatta hur snabbt bolaget skulle utvecklas och också hur marknaden fungerar. quantitatively judged. But now we have established the company and we have a sales team in place. We have knowledge about our products, how they work for customers. We have a stable customer base, which also works. So maybe the time is a little more ripe to set that type of goals now and in that way reach a little more clarity for our investors. So that's something we're thinking about to summarize.

Finally, we have no more questions from the audience. If you were to summarize your potential in the future, what would you think about it?

This is a very exciting company. I have an incredibly fun job in bringing out Swedish technology in the world in this way. The potential is enormous to grow much faster in the future and build a leading company in a very exciting way. I think we have the market there. We have several factors that work for the market to go in the right direction. We know that our technology works. We have a customer base that is also being developed. We have an organization where we have a certain expertise and competence. So the potential is, in my opinion, incredibly high. And I think that the investments we are making are well valued and in the right direction.

Good. Thank you for that. We have no questions from the audience, but thank you for answering the questions. You are welcome again for the next quarter's report