SenzaGen AB

Tack så mycket och välkommen från min sida till den här genomgången av kvartalsrapport andra kvartalet 2025. Sensagen håller på att bygga framtiden för djurfri testning. Mitt namn är Peter Nelstedt, vd för bolaget de senaste åren. Vi har en liten kort disclaimer som ni inte behöver upprätthålla er för länge vid. But maybe a little further here in our agenda. To begin with, I will go through the financial results for the second quarter, 2025. Then I will talk a little more about Guard specifically, how our key platform goes in sales. And then a strategically large progress we have made is that we have received an additional approval for GuardScreen from OECD. Furthermore, we are working with our subsidiary VitroScreen to strengthen them for growth. After this, we go into a more general description of Senza again, and then our strategy, more specifically our R&D pipeline, how we had planned for this company to grow and develop forward. And finally, our focus areas for 2025. Q2 2025 is a quarter where we have had an incredibly good order intake. The order intake is significantly higher than our sales. And we also have this regulatory progress to tell about. In numbers, we can see that despite the high order volume, our sales stopped at 13.5 million. This is due to the fact that we received a lot of orders very late in the quarter and he did not deliver our results on them. Valutajusterat, dock, så ligger vår försäljning ungefär på nivå med föregående år. Vidare har vi Guard, som vi redovisar separat för att titta på grundplattformen. Den växte vi med 3 % i kvartalet, en siffra som vi inte är supernöjda med. Men man får komma ihåg att vi har också valutaeffekter, så valutajusterat har vi 10 % tillväxt. Även det är någonting vi strävar förstås efter att överträffa But that's what the picture looks like. The gross margin in the quarter landed at 64%. We have had a fairly large share of sales from ToxHub and also had product mix issues from VitroScreen, which made the gross margin a little lower this quarter. But if we look at In the first half of the year, we are stable at 70%, which is what we have historically done and what we should be. In summary, we have a EBITDA loss of minus 3.4 for the second quarter, due to the fact that the sale is a bit late due to the late orders. But we have improved our cash flow, we have good cost control and a stable gross margin development. If we look at GARD, the order intake is much higher than the sales, which is good for the near future, in the second half of the third quarter. We reached a book sales of 3%, which would have been 10% if we had been able to supply constant currencies. Under the second quarter, we still don't have as many large orders, but there are many orders, significantly more orders than we had a year ago, but a slightly lower value per customer. Customer acquisition is moving very forward. We have 14 new customers in the quarter. In the same quarter, we had 10, so we continue to increase the customer base. Of these 14 new customers, 7 big international companies that we know have a very high return rate, in principle 100%. So we have 83% coming from direct sales. It is stable, a bit over 8%. We had a little lower Or a slightly larger share from distributors a year ago with the corresponding quarter, but we are around 80%. And when it comes to revenue from returning customers, it is 80% of the sales. It is very positive that we have built up a stable customer base for Guard that also returns. And we now see quarter after quarter that we have about 80% from. Returning customers, at the same time as we have very high customer acquisition, so the mathematics in that means that we will show growth in the future if this continues. Brutal margin 66%, it is slightly lower due to the product mix than we might want to see for God, but it is as you can see in terms of what we achieved from the previous quarter. Vi ser det här kvartalet som ett bra kvartal, sätter orderintag, något lägre för försäljning, men att vi har en väldigt solid bas för tillväxt den andra halvan. Jag nämnde att vi haft ett strategiskt genombrott och det rör att vi fått OECD godkännande på guard skin inom test guideline 497. This is an additional approval. GARD was previously approved as a standard test for SkinSense, but there is a large part of the market that consists of tests in a so-called defined approach. This means that you have a combination of three different tests, and if two of them are consistent, then you can say that you are sure that the product you test does not cause allergies. So, this pre-determined three-test method, let's put it that way, we have not been able to integrate with GARD, but it has described three other tests. What we have now got, right here in the shift by half a year, is that GARD can now be used in this three-test method as one of the three alternatives. This means that we have opened up a very large part of the skin sense market that we previously had difficulties to get to. And the reason why customers should choose GARD, besides the other approved methods, is that we have very good performance. Our test is very advanced. It is based on 200 genes, while other methods are often based on just a few biomarkers. And GARD works when there are problematic chemicals or substances that you want to test, such as extracts or mixtures. Så det är väldigt viktigt för branschen att få tillgång till en metod som fungerar även för komplexa produkter, för det är vanligt med komplexa produkter och blandningar, speciellt i kemikalie- och kosmetikerindustrin. Så det här har varit en nyckel och någonting vi jobbat för att uppnå faktiskt ända sedan vi fick det första godkännandet på Gard. Så vi tror att det här kommer att öka efterfrågan signifikant, betydligt och Vi har försökt litegrann ta reda på hur mycket kommer det här påverka vår försäljning. Det är lite svårt att säga. Vi vet att den här tretestmetoden är väldigt vanlig regulatoriskt. Vi höll en webcast direkt efter att vi fick det här godkännandet. Vi hade över 200 deltagare. Det är väldigt många i vår nischbransch. And 63% of those who answered our questionnaire said that we have problems with challenging substances. So two thirds of those who answered say that they have problems with challenging substances when they use this method. And now we have brought in GARD to solve this. So we believe that this will have a very strong impact on our sales here in the near future and of course also in the coming years. So this is a major breakthrough for GARD. This will lead to us continuing to get new large customers. We have already built up a customer base with a number of world-leading companies. There are a few left, of course, but here you can see a small example. L'Oréal, Clarence as representatives for cosmetics. Sonova for Medtech, the world's largest hearing aid company. Corteva, which is a subsidiary of DuPont DAO, the collaboration within agrochemistry. So this is a company that we have collaborated with and published with, where we are allowed to use their name, but we have, of course, many more on a much larger customer base than that. The other parts of our company consist, among other things, of Vitroscreen, and this is a company that we have had a temporary challenge with. We made a leadership change at the end of 2024 to get a better commercial orientation of the company. It started when we recruited a new sales organization. They took place in February. And what has happened since then is that what started is that our sales pipe has become incredibly much stronger. So we have basically gone from a very low sales pipeline to now having a very strong sales pipeline. And what happens here next is that the sales pipeline will give orders. That has started to happen. We now see that our order book has grown. We had significantly higher orders under Q2 than we had under Q1. And we also have a significantly higher order value than what we have sales. So despite the fact that sales under Q2 remain at the level of Q1, So går vi nu in i andra halvåret med en betydligt starkare orderbook och en betydligt då starkare salespipe. Så vi är ju positiva här för framtiden för VitroScreen och vi tror att vi har vänt runt utvecklingen och kommer att visa tillväxt här inom kort. Then we have another unit in our group, ToxHub, which gives advice on advice and regulatory investigations on how to carry out animal-free testing. This unit has gone incredibly well this year. We have a very strong development in both order intake and sales, and we are very happy about that. Then we have the daughter company status, positive for the second half of the year. This concludes the comments about Q2, which we think has been very good from an order entry sales pipeline perspective, where we have positioned the company better in terms of getting this additional approval. So we are very positive that we are entering a strong second half with this order book in the back. So, let's move on to the presentation. In short, we will lead the global shift to ethical, non-animal-based toxicity and efficacy tests. We will do this by providing high-tech animal-free solutions. In this way, you can reduce animal tests while improving product safety. because our test, in many cases, is significantly more safe than the animal tests. In this way, we contribute to the fact that there are both safer and more sustainable products on the market. We are a company group. I have already described what it is like for the different components in it, but the largest unit and our basic unit is Sensagen. We are based here in Lund, Sweden. We have 21 employees and have expertise in animal-free toxicology. Utvecklare av GARD-teknologin och även genomförare av sådana tester åt våra kunder. Vidare förvärvade vi 2021 VitroScreen som gav oss ett ben in i djurfri effekttestning så att utöver att titta på säkerheten, toxikologin, kan vi också titta på performance på produkterna, hur bra är den nya produkten effektmässigt utan att offra djur i onödan för det. And VitroScreen has a test platform called Aura, which builds on organoids, which is very exciting and which we are promoting further development with. Twelve employees at VitroScreen, 21% again. Next, we have ToxHub, based in Rome. It is our regulatory advisory unit with three employees who are currently having a very good development. Our market. is very interesting. The total market is very large, 13 billion dollars for in vitro tox and effect test, in vitro, that is, animal-free. We have calculated that we have a totally addressable market if we could go in with the product portfolio we have, which is a total of 3 billion dollars. But if you boil it down to the serviceable market, the one we are going towards today, we estimate it to be about half a billion dollars. Marknadstillväxten är uppskattad till att vara mellan 6 och 9,5 % mellan 2024 och 2028. Så det är förväntat att fortsätta växa. Det beror på att vi har en stark vetenskaplig utveckling. Det kommer fram nya bra test som GARD. Det kommer nya regleringar och initiativ från regulators. Det behövs billigare och mer kostnadseffektiva sätt att testa. Det är urfritt. And then, of course, there is increased social engagement from companies that do not want to sacrifice animals unnecessarily. Europe and North America are about 75% of the market. You can also say that this is where we have our focus. And we are quite industry dependent. We sell both to cosmetics, medtech, chemicals, medicines and the nutrition industry. Vi tar oss an den här marknaden som sagt med den portfölj vi har idag men det är väldigt viktigt att vi fortsätter att driva innovation och det gör vi på det här sättet. Vi har ett antal projekt i vår pipeline som om ni kan se illustrationen kommer att signifikant bidra till att vi utöver den tillväxt vi haft sista tiden kan accelerera den betydligt. One thing we are working with is GuardSkin dose response. It is a further development of GuardSkin and it means that if you identify an item as allergenic, then you can determine with dose response at what doses it is allergenic. So it will be a follow-up test and it has been a very popular test already now, but we assess that if we can get a approval within OECD and get it as a standard, then we have a even stronger development forward from GuardSkin Dose Response. So that will contribute significantly. The other project we have is GuardSkin Medical Device. There we are working on getting Guard as a standard for MedTech tests. It is incredibly exciting. In MedTech, you use animal testing today. So here we could try to get GuardSkin in as the animal-free standard alternative. Then we continue to work with VictroScreen's organoid platform. What we do is that we try to standardize the offer. And beyond that, we work on upgrading the technology for GARD. And then it is mainly the gene expression part that we look at, if we can do a technical upgrade there, which could lead to us getting significantly better margins. A little bit about how it goes with these initiatives. Det går riktigt bra, det går enligt plan. Vi har inom God Skin dose response så har vi skickat in data till ECWAM som är EUs myndighet som så att säga gör en utvärdering innan man kan komma till OECDs testprogram. Vårt mål är att få in God Skin dose response senast 2027 och som sagt vi bedömer att det kommer att öka efterfrågan betydligt därifrån. Then we have the MedTech program, and here we had a meeting with ISO's working group. And we presented very strong data, where we show that GuardSkin Medical Device works very well for identifying allergen risks in MedTech. So the data we presented achieved with ease the goals set out to become a standard. The next step in this project is that we need to do a so-called ring trial. Ring trial means that we have to create, we have to compare results on independent labs of each other and show that the technique is transferable between labs. So that's what we're going to do here under 2027, or at least our goal is to get this done by 2027. And if we include Guard Skin as a standard in MedTech, it opens up an enormously large market that today only consists of animal tests. So this can be a game changer for the company. We are working to achieve this by the end of 2027. Furthermore, we are working with a little closer business development. We license and implement also complementary methods. Under this half-year, we have implemented EpiSense A, which is a animal-free skin sensitization method test. There we have received our first orders and it looks very positive here before the autumn so that we can continue with that. The method also completes the guard skin very nicely. And it supports that we have taken the right path, that we, in addition to our self-developed tests, add complementary tests to our portfolio. In addition, in terms of innovation, we have the organoid model that I talked about from VitroScreen. There we now have our first customer order for a brosque cartilage-based organoid model from a medtech company. Det är ett jättespännande projekt som vi hoppas vi kan upprepa med många fler kunder inom Medtech som tittar just inom det här området. Vi har också en ny order från amerikanska RIFM, Research Institute for Fragrance Materials, som är en branschorganisation för kosmetikabolag. Där tittar vi på att identifiera så kallade fotoallergener. Detta är ett nischområde inom hudsensibilisering och det är att det finns risker med att när produkter utsätts för solljus så kan det leda till att produkten förändras kemiskt och kan trigga hudallergier. Detta är ett rätt så klurigt område som man har svårt att möta med djurfria metoder idag så vi ligger i framkant, bedriver utveckling inom detta med mål att också här kunna få fram en produkt och en mer standard service. Sen vill jag också nämna att det här globala skiftet mot djurfri testning accelererar. Vi har väldigt positiva signaler från USA här under våren. Först från FDA. som går ut och säger att nu är det dags att gå över till djurfri testning när det gäller att ta fram data innan first in human trials för monoklonala antikroppar. Ett jätteviktigt biologisk område som nu FDA signalerar så starkt att de tycker att tekniken inom AI och organoider bland annat har kommit fram så mycket att man bör kunna lita på detta och inte i onödan offra djur för det här stadiet. We then came from NIH, the American NIH, National Institute for Health, where they say that we will not support projects that only include animal testing, but what we want to see is that the evaluation and the funding we will offer will go to development that contains animal-free alternatives. Vi har också en utveckling i EMA och TGA som under olika seminarier tillsammans med NIH även nämner att de vill titta på det här området. Sensens strategi ligger perfekt i linje med den här mer långsiktiga utvecklingen som ser ut att accelerera med de här signalerna. Vad ska vi göra närmsta 2025? Vi har en väldigt bra kassaposition så vi kan fortsätta att driva bolaget, driva på organisk tillväxt, vilket är vårt mål. Vi driver på försäljning genom att fortsätta influera industrin med vår banbrytande teknik och våra innovationer. Vi tittar på att fortsätta expandera vår kommersiella organisation och arbeta vidare här med vändningen på vitro screen som vi börjar se tecken på hända. Sen är det vår testportfölj och våra regulatoriska godkännanden som vi uppnådde här med 4, 9 och 7 godkännandet under våren. Vi kommer driva vidare de projekten enligt det som är beskrevet. Och sen för att då kunna växa bolaget in i nya spännande områden inom djurfri testning där vi ser att det händer mycket så har vi ju redan genomfört ett par förvärv och detta ligger inom vår plan att kunna göra fler av och det får vi då återkomma till. Men detta är våra fem fokusområden. And I summarize with a very strong starting position for the coming quarter with a good, very good order intake during the quarter, strong order book, cost under control, improved conditions for GARD with our additional approval and stable margins. So with that, we will build on that success and I look forward to a very interesting continuation in 2025. And with that, we can end the presentation.

Thank you very much, Peter. This is Rodne Alvén from Halvorsson. I was just going to ask some questions for the sake of the report. You talked about the sale landing at 13.5 and the currency adjusted to 14.7. But can you explain more about the factors that have affected the sale and how to work to strengthen the growth rate?

The short explanation of the sale comes from the fact that we have a growth rate of 3%, which is adjusted to 10%. And we also have significantly more sales orders and significantly more projects. than we had compared to the quarter of 2024. But we have a slightly lower value per year, and that is actually only due to the fact that we have few large projects. We believe that this is due to the start of this year, which caused quite a lot of uncertainty in our environment, and we also have very large companies, that you might have held on a little bit, to carry out these larger projects, while the smaller projects have fallen in just as they should. So Q2-24, our comparison quarter, we had a number of slightly larger projects in sales. So that's one driving force, and the other is of course VitroScreen, where we have a lower sales than Q2-2024, due to the fact that we entered the year with a very low sales pipe. The way we started working with this, we continue to work with the guard strategy that has been successful and will be here in the future as well, where we now see a little bigger orders in our pipeline. And then it is then to convert this sales pipe on VitroScreen, which is now built up to stable orders and then also sales.

Earlier this year, it was said that there is a big uncertainty on the market and that it has led to longer sales cycles for customers. Even now in Q2, we see a slow quarter when it comes to sales, but the order intake is very strong. So is it right to say that you see a trend shift during the quarter? And can you also mention something a little about how the third quarter has started?

Good question Rodney. In summary, yes, we have seen a trend shift in our order intake during the second quarter. We have an order intake that is much stronger than the sales we show. We have not had that situation earlier this year. We have had two trend shifts during the quarter. First, we see a stronger development of our sales pipe. And then we start to see this improved order flow, which we also talked about. And we see in Q3, since we start with a stronger order book, we also have a number of slightly larger projects in our sales pipeline. Så det ser betydligt stabilare ut här för tredje kvartalet och då andra halvåret. Det ser väldigt positivt ut vad gäller tillväxt kan vi säga.

Vad gäller bruttomarginalen så följer den från 70 till 64 och du talade om mixeffekten. Kan du utveckla vad det är som har drivit bruttomarginalen och sen hur ska vi tänka kring den framöver?

Just this quarter, in sales, we had 66% on Sensagen sales or guard sales. And we've been around 70%. But it sometimes happens, depending on individual customer orders or mix, even in guard sales, that we end up around 65% and sometimes 75% for that part. So as a small company, it can hurt a little bit without having to think so much about it, I think, but we believe that it will come forward, we will be around 70% or even 70% plus. And the other part of the mix is that VitroScreen on Q224 at an unusually high margin of far over 70% due to the same project. Now they are on a little more normal levels, which is just north of 60. So in summary, we will be Circus 70% and these are the two factors that explain it.

So you don't see any structural pressure on the margins?

No, I don't. managed to carry out the price adjustments we did at the beginning of the year. So there should be no harm in that.

You also talk in the report that you have lowered your cost level. Can you tell us a little bit about what you have lowered for costs? And then, has it possibly affected your growth potential? That is, you have worked too much with costs, which has led to a drop in sales. How should we think about that?

No, you shouldn't see it like that. We have lowered the total cost level of the company. It's actually about having more people in the company who work with sales today than we had a year ago. And it's because of this. the shift and restructuring we have done on VitroScreen, where we have reduced the cost per employee to a significantly lower level. So that's what leads to this savings. But we do not judge that this will affect sales. On the contrary, we have strengthened the guard organization when it comes to our lab and we have strengthened VitroScreen in the number of sellers. has no impact on the sales rate.

We have received some questions from Magnus Stenberg. The first is, what is the size of the three-test method market?

It is a bit difficult to appreciate, but since We believe that at least half of the skin sensitization market uses the three test methods regularly. And then the other half is more left to the other test methods, where GARD has been a very good alternative. So in one way you can say that we potentially double the availability of GARD. And as I said, with two-thirds of the market that is actually, according to our research, in and of itself with perhaps a little biased selection, that two-thirds have problems that Galt can meet, it looks very good.

And he also asks, what is the sales goal set at a three to five-year term? And what market is the reference in half a billion, three billion or 13 billion dollars?

The reference right now is that with the set-up the company has, we are on the half-billion dollar market. We have to come back to when we have finished the assessment, if it has perhaps expanded somewhat due to this OECD 497 approval. And what our sales goal is in three to five years, we have not communicated such a target externally. Men det vi pratar om är att Sensagen vill på den här stora marknaden bli ett ledande bolag. Och vi har vuxit bolaget med många hundra procentsätt över de senaste åren. Och vill ju fortsätta utveckla bolaget och bli ett rejält bolag.

Han har sedan en annan fråga här. Varför tar det så lång tid med Medical Device Ring-testet? Har inte detta gjorts för de andra godkända testerna?

Yes, Magnus is right. We actually did a ring trial for GuardSkin and it has been done several years ago and shows very good transfer of the method. But to enter MedTech, the ISO group, which consists of regulators, FDA and Notified Bodies in Europe, and large companies, decided that the consensus was that when we were to introduce new methods, we had to show that the OECD methods, which for some are generalized and approved, also work within the application area within MedTech. Both by showing that it works with a so-called proficiency test, and then that you can transfer the method to LAB. We could argue that the method is very similar to Guard Skin, so that we already have this transferability between LAB. Men vi behöver göra om den tyvärr och då ska det göras på ett sätt som inte vi själva helt råder över utan vi väntar nu på att få lite ytterligare klarhet kring hur det här ska gå till och det kommer vi att få här i början av hösten.

Mm, tack. I de senaste kvartalsrapporterna så har ni beskrivit de här utmaningarna ni haft inom VitroScreen och att ni också har vidtagit en rad åtgärder för att vända utvecklingen. Så kan du ge oss en mer detaljerad uppdatering kring hur det går?

Ja, alltså vi ser ju nu operativ förbättring på VitroScreen. Vi har The lab that acts faster and we do shorter lead times to deliver results, we have already started to take over earlier during the end of 2024 and the beginning of this year. And then we have the sales organization in place in the middle of Q1. And already now we see an increase in our order book, but above all, it means a stronger sales pipe. So we see that the measures have begun to give effect, even if we are not yet at the goal of restoring sales growth.

Right. And this is one of the two acquisitions that you have carried out in recent years. And you are talking at the same time about the fact that future acquisitions are important for you in terms of strategic priorities. So what kind of companies and markets are you most looking at? The other question related to that is, do you want to turn to development first on VitroScreen before you look at new acquisitions? Or can you do the processes in parallel?

Yes, that's a good question. I just want to comment briefly on VitroScreen. It's easy to get very negative because of the lower sales in the last two quarters. You have to remember, I think, that we acquired the company in 2021. We have had three strong years where VitroScreen has contributed with profit, operating profit in the business, positive cash flow and also given a toolbox to take on effect tests. So from my point of view, it has been a fantastic acquisition for the company, even though we have had some operational challenges in the last two quarters. So with that, we see on this market, in vitro toxicology effect test, free of charge, with the signals we have from our environment, from FDA, EPA and so on, that we want to make a change, that there is an incredibly interesting area of development here. In principle, we have the main part of the sales within just one area, which is skin sensitization. It's a great area, but there are other components within toxicology to start with, which we look at, how the development is going and what needs are there. Skin sensitization, which we work with, has come quite far with the transition to animal-free, but within other toxicology endpoints, är det fortfarande väldigt mycket djurtest. Så där finns det ju liksom jättepotential att komma med ny teknik eller nya erbjudanden. Och det kan vi titta på både innovationsmässigt med vår egen kraft, men också genom att tillkompletterande förvärv. Så att vilka förvärvsmöjligheter vi tittar på, vi har haft fokus på att hitta lönsamma växande bolag som kompletterar det erbjudande vi har idag, så vi kan ta nytta av den säljorganisation byggt upp.

Justine, thank you. And finally from me, it's exciting, you are inviting us to a capital market day in the report. Can you tell us a little more about the agenda and what we can expect from that day?

Ja, vi ser väldigt mycket fram emot att ha en kapitalmarknadsdag och verkligen kunna gå lite mer på djupet kring vår strategi och just de här möjligheterna som vi nämnde med nya innovationsmöjligheter inom djurfri testning. Det har kommit väldigt mycket starka signaler från hela marknaden. Marknaden är stor. Vi har väldigt bra möjligheter och en stark position inom en nisch. Vi kan ta oss an fler nischer. Det är bra tajming att beskriva en mer utvecklad strategi för bolaget framåt. Vi kommer också jobba med att ha flera talare än bara med i vår vd. Som vi kanske har hört så synds mycket, som en talesperson för bolaget. Vi har flera andra starka kort i vår ledningsgrupp. som också nu har blivit key opinion leaders i fältet. Så vi vill att vår försäljningschef kommer att delta, vår forskningschef kommer att delta. Vi tittar på att bjuda in internationella experter som kan ge en lite bredare bild över marknaden och djurfri testning och möjligheterna. Så vad man kan förvänta sig är ju en strategisk plan framåt för tydliggande av det och vi vill bjuda in våra nuvarande ägare och förstås också resumtiva nya. Vi kommer hålla kapitalmarknadsdagen i Stockholm den 10 november och vi kommer återkomma med mer.

agendan och inbjudan inom kort. I have one more question from Magnus Stenberg in English. How does the US customs influence the business?

Fortunately, we are in a situation where the customs in the USA do not affect us at all. There are no customs on service sales to the USA from the EU. Even with these new ones that have come, so we have zero impact on that. We have no indication of product sales to the USA today that could affect that.

And you don't see any change in customer behavior, but everything is as it usually is when it comes to customer behavior?

No, I wouldn't say that. We have about 75% of sales in Europe, 25% from the USA and that figure is relatively stable, so we don't see any change there. There are opportunities to grow a little more in the USA, since some customers do not want to send prototypes across the Atlantic to Europe, because they have been tested for other reasons. And there we have trained and launched a new CRO, IIVS, and I think they will have a good development here in the second half of the year. They have worked on implementing Guard in the first half of the year.

Thank you. I have no more questions from the audience and no more questions myself. With that, I thank you for me. If you have any final words, please share it with us.

Otherwise, we thank you for us. Thank you so much for listening. Thank you for good questions to you, Rodney. We look forward to an exciting continuation in 2025. Thank you for that. Thank you very much.