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Welcome to Biotage Q1 2024 Report Presentation. [Operator Instructions] Now, I will hand the conference over to CEO, Tomas Blomquist; and CFO, Andrew Kellett. Please go ahead.
Very welcome, and let's start with just a correction, that it is not Tomas Blomquist that is presenting, because he's no longer in our company. It's Torben Jorgensen, who is presenting as CEO.And welcome to this webinar on our Q1 results. We will start with just a few slides on who we are, and then we will try to put a little more flavor to the executive summary that we have. And then Andrew will drive us through the financial update and then, hopefully, lots of questions afterwards. So let's get rolling.I think you have seen this slide before, but it's always good to repeat what kind of a company are we, because as we also have addressed in our Q1 report, not the least the CEO words that we have tried to simplify our strategies going forward, being more clear on that we are the global go-to separations company.And as you also know that we do have quite a lot of products that covers workflow solutions for our customers that includes instrumentation, consumables and services. And as you can see in the middle of the slide that we are covering more or less all of the stages there is in a drug discovery. So we can facilitate most types of customers.And of course, to the right of the slide, you see all the modalities that we are having in our pipeline and our product portfolio. So I think we are pretty well equipped for also seeing some interesting growth going forward.Which brings me to the next slide. Just as an executive summary, as you all have seen this morning, we came out with a top line of SEK 480 million, a 33% growth over last year with a very impressive gross margin of 63.1% an uptake of 2.2%, and that we are also pretty good in converting our sales to cash. As you can see that we have converted SEK 171 million, and having an adjusted EBITDA of SEK 126 million.As I also wanted to allude to before we get to Andrew is, there has been a tremendous growth in our recurring revenue that is now up at 72%. Some of you know that in the old days, we were fighting to get to this percent. And we have now moved from 67% out of the year 2023 and now are at 72%.And of course, that has to do with the Astrea business that has grown with 78% over last Q1 in '23. And as you also can see that now, our advanced therapeutics and biologics is now covering 30% of our business. So a very, very good going forward.There's one caveat that we are not happy with, also mentioned in the report that was, that we didn't succeed in getting the core Biotage to a 0 level or, as we said last time, a small increase. And you also know the reason. And in a positive way, we say, there is a tremendous demand in the peptide business and we were not able to fulfill that demand.Have we had the opportunity to do that, we would have had a very good single-digit growth even into the core business. We are working on it. We are increasing the capacity going forward, and we are still seeing a tremendous growth in the peptide area. We are continuing to invest both in manufacturing facilities, but also in our R&D capabilities around the globe.So with that, I think I have -- there's one slide more, which I want to just allude to. Just to give you a flavor that, it's not just our current business, we are also launching new products, And you can see the PuraBead.And one of the things we are also constantly having in our mindset is that we need to continue to be developing products that can be sustainable and that we are trying to take out, let's say, all the solvents we can, and it goes for both sides of the slides. And that we are also bringing more products into the PFAS area going forward. And hopefully, we will see slides also in the next quarter that also having some instrumentation out on the field as new products.And by that, I hand over the floor to Andrew.
Thank you, Torben. The business had, as Torben just mentioned, had a good start to the year with a solid Q1 performance. We returned to positive organic growth in our key markets in the Americas and EMEA. We delivered strong recurring revenues of 72% in quarter.It's worth just pointing out that Biotage is built on sound fundamental foundations. Our business is focused on the traditional small molecule market, delivers predictable revenue streams, industry-leading gross margins, and solid underlying EBITDA and cash generation.Our Biologics & Advanced Therapeutics business, which incorporates Astrea gives us access to the higher growth biopharmaceuticals market and the ability to generate superior revenue growth and attractive margins. And as you just heard, our Biologics business in Q1 accounted for 30% of our total revenue compared to just 4% in Q1 '23.Coupled with our expansive modality offering and expertise, a further strength of Biotage is its balanced geographical profile with strong positions in the Americas and EMEA markets and attractive place in selective key Asian markets that offer powerful medium term growth opportunities.And we just heard, in the quarter we delivered revenues of 480 million, up 33%, gross margins of 63.1%, up 2.2 percentage points, and underlying EBITDA at SEK 126 million, up 28%. We saw very encouraging double-digit growth in EMEA and smaller positive growth in the Americas. But on the flip side, we saw strong wins in China still.We've seen a recent marked acceleration in customer demand for equipment targeted at the peptide market which we have been unable to fully keep pace with in the first quarter. We are working actively with our partner to ensure additional production capacity is available so that delivery can take place in the required volumes in the coming quarters.Had it not been for this issue, we would have been able to report some quite nice positive organic growth rather than the small negative organic growth of 1.4% reported.Just a few words on Astrea. In Q1, Astrea delivered SEK 129 million in revenue and a gross margin of 64.8%. Compared to Q1 2023, revenue grew by 78%. And just to reiterate what I've previously commented, Astrea is a growing business and not at a stage where it neatly fits into a stable uniform quarter format like our Small Molecules business.Of course, we're very pleased with our Q1 growth, but you cannot take that Q1 growth and assume it applies uniformly to the following quarters. It is still lumpy. But what we can say is that we are on course to deliver very pleasing growth year-on-year with current market forecast appropriately reflecting this.Our Small Molecules, in the quarter we saw growth in Biologics & Advanced Therapeutics, Analytical Testing and Water & Environmental Testing. Our small molecule business saw declines driven by suppressed business activity with APAC heavily impacting this. Our Scale Up and Diagnostic businesses, which together represents less than 10% of our business, also declined in Q1.With Scale Up, the decline was driven by the comparator with Q1 '23 containing the last remnants of COVID related business in China. With the Diagnostics business, we were again up against some very strong comparators with a very large customer order delivered in Q1 '23. Order intake in both our Scale Up and Diagnostics businesses is more lumpy. Therefore, you have to focus more on the medium term trend rather than a particular quarter.At constant exchange rates, excluding Astrea, our EMEA business delivered solid organic revenue growth in the quarter of 10%. Our Americas business delivered growth of 2%, while our APAC business saw a negative growth of 17% in Q1, driven by China.Excluding China, our APAC revenue in Q1 was consistent with the prior year. Needless to say, we're actively looked at all our businesses on a routine basis to ensure that we are rightsized to ensure continued prosperity. FX headwinds in Q1 '24 held back our organic growth by approximately SEK 5 million or 1%.If we look at our total group business, including Astrea, our EMEA and American markets accounted for 83% of our total business compared to 72% last year, with APAC accounting for the further 17% or 28% last year.Our recurring revenues were very strong at SEK 346 million, representing 72% of our total revenue compared to 59% last year, with our nonrecurring revenues making up the balance of 134% or SEK 28 million compared to 41% last year.Our recurring revenues give us more predictability in our results. Our guiding principle is always to put the customer first, and so to concentrate on forming long term partnerships with them to solve their problems, improve their workflows and efficiency, and [Technical Difficulty] additional volume.In Q1 we delivered an adjusted EBITDA of SEK 126 million, 28% above Q1 last year. In the quarter, we also took approximately SEK 8 million in charges relating to the CEO transition. And as these are one off in nature, they have been excluded in deriving the adjusted EBITDA total.We delivered a very strong adjusted cash flow from operations of SEK 171 million, SEK 103 million above the prior year. We finished the quarter with gross cash of SEK 683 million and net cash of SEK 426 million.Also during the quarter, we continue to invest in R&D to be at the forefront of innovation leadership in our markets. We have an attractive R&D pipeline that will power our future growth.As you've just seen from Torben, we continue to launch exciting new products in the quarter, and we're particularly excited about Astrea with our novel nanofiber technology platform that addresses the challenges of purifying large and fragile modalities in the fast-growing cell and gene therapy market.So in summary, Biotage has a strong market position with an enviable broad suite of critical must-have solutions in our key markets of drug discovery and development through to diagnostics and analytical testing. We have a clear strategic vision and are resolutely focused on executing on our plans to deliver superior growth at attractive margins.And just a final reminder to everyone that Biotage will be holding a Capital Markets Day on Thursday, 23rd of May in Cambridge, and we would very much like to see as many people there as we can, so we can outline how Biotage is evolving and explaining in more detail our exciting technology and growth plans.Back to you, Torben.
Now, as you have heard, so now we are facilitating that we can get some [Technical Difficulty] and I want to reiterate what Andrew just said that we would absolutely encourage as many as of you that come to Cambridge, and first of all, have a presentation of other managers in my team, and of course, even more see the site in Cambridge, where you will see some of the fantastic new products we are trying to develop.So by that, we will open for questions.
[Operator Instructions] The next question comes from Ludvig Lundgren from Nordea.
So first of all, given the Astrea growth here, you stated that's 78% year-over-year growth. And when I try to back out some type of seasonality for last year, I get that it was a sequential increase throughout the year. Maybe this is more related to the scale up of the business than the seasonality. But can we expect some type of similar seasonality for this year?
Well, we've, obviously -- we're not giving guidance on kind of the quarter-by-quarter performance of Astrea. We're happy with Q1 performance. And yes, it was a lot better than Q1 '23. We're very happy. We've got a growing business.And will that growth be a nice linear upward line? Probably not. I mean, life, I suppose, is never like that anyway. There will be lumpiness in the revenues in the quarter, but we have got a nicely strong growing business.And of course, as our business grows and develops and matures, we'll start to see a more normal phasing pattern, but we're still in that process or in that stage of understanding what is that normalized phasing of the business. Therefore, I wouldn't necessarily read too much into a quarter-by-quarter performance. Keep your eye on the bigger picture on the yearly growth of Astrea.
Okay. And then also on maybe just focus on the Small Molecules business, here it was a continued decline year-over-year. But maybe if you could dig in a bit into the dynamics throughout the quarter, like how was, for example, the exit rate out of Q1, was it stronger than the start and so forth.
You can say that, first of all, I think, it's not bad to get as close as 1.4% negative growth. We would have liked to be on top of it. There are differentiations in where is it that the growth is, because if you look at some of the areas around it, then there is areas where it still grows. We could see also that the peptide business is booming, and it's not just from one area. It's all 3 regions that there are booming incoming orders and requests going there. The analytical business is also coming back after the, let's say, the COVID times. So we see a really nice uptick.It is, as Andrew said, we are really having not only headwind, a head storm in China. And I would also say we are not, as I maybe have said before, trying to see some light in the tunnel for China in the coming quarter. I don't think we will see that either. It is extremely tough there.I would say, Japan, Korea is in reasonably good shape. And we have seen some encouraging, let's say, orders coming in, in recent times. So it's still tough out there, and people are keeping tight on their money, but we are seeing progression. We are also hoping to see that the downturn we have seen in China is going to be less over the quarters coming, but it would still be very, very tough times over there.
Right. Got it. So then maybe you mentioned the peptides. So with this increase in demand, and you were not even able to deliver on all of the demand, if I understand correctly. Do you think this is a new trend that will be sustained throughout the year or is this just a temporary thing?
No, I don't think that it is just a 1 year situation. We strongly believe that the demand will stay pretty good for the coming years. So our, let's say, focus is to secure that we get much more manufacturing capabilities. And to that end, I can say, I visited our supplier a couple of weeks ago, just to make him very well aware of that what our demands are.And the positive thing I saw was there was -- that there were 2 new machines there that are up and running already, and we can expect to see progress in being able to deliver more in Q2 and forward.We still have work to do to get up to the level where we want to be, because it is more than double of what the capacity was a quarter ago. So I would say, no, we don't see it as a 1 year lump up. It's, hopefully, going to continue, and that's what we are seeing.
The next question comes from Simon Larsson from Danske Bank.
A few questions, please, from my side as well. Continuing a bit on the peptide purification business, how much do you estimate that your lost or maybe, let's say, pushed out in the peptide business here in Q1? Torben, you said a very good single-digit growth, hadn't you sort of missed on the deliveries? Are we talking more than SEK 20 million here that you pushed out, so to speak or can give us something?
Yes. We just want to give you a number of SEK 35 million.
Translate that, we would have been reporting an 8% organic growth.
That's very impressive. I mean, I didn't quite catch what Torben said here to the final question before me. But do you expect to sort of deliver on that already here in Q2 or will that take some time?
It will take more than Q2 to get to that level, because as you can understand, with SEK 36 million -- and let me also say, new orders are already bouncing in for Q2. So we will not be able to clean everything in Q2, but we will deliver more than we have done in Q1.On a good day, I hope, that we will get closer there in after Q3. But there needs to be done more than just having 2 new machines. So they need to increase their capabilities in manufacturing going forward. And that's where we have a dialogue with them ongoing as we speak.
That makes sense. I mean, the weakness in instrument sales, could you give any more insight to that? I mean, is it primarily due to weak Chinese CRO, CDMO market for Small Molecules like flash chromatography systems or is it something else that's dragging here?
I would say that it is predominantly the flash purification. And of course, China is the major, let's say, place where it has gone down. As you can see, what Andrew said, we have a growth in EMEA of 10%. So the business is going quite well there.We are also having growth in the U.S., not as nice as in EMEA, but there are growth. It is -- and I must say it is extremely tough out of China. Of course, the comparison numbers going forward are going to be better, but we are more looking into the nominal business and that is tough.
And the final question from my side. So I noticed roughly 30 people less employed in Q1 versus Q4. So you obviously sacked a few people here during the quarter. Should we expect this to show in the P&L there going forward in any way?
No, I don't think -- it's just a general trend of joiners and leavers. And so, we've not been -- business is not in any kind of -- so it's just a normal trending pattern. So I wouldn't read too much into the quarter numbers.
The next question comes from Karl Noren from SEB.
Some questions from my side as well. If we start on the Analytical Testing side, which I think was very strong this quarter, quite an uptick from recent quarters. Could you just mention anything specifically what drove this growth, any new customer signed or new contract going on?
I would say that it is getting the business back we had before COVID. Let's say, CROs in all the big Labcorp, Quest, they are getting back to normality of having test of many, many other samples than just for COVID. I wouldn't say that there are any one big ticket that has come into play that we haven't had before. So it is just normalizing the business getting back to where we were before the COVID.
One thing about -- further Karl on that is that, the Analytical Testing is a great sticky business and a great high recurring revenue. So, applying consumables into, Torben said, Quest and Labcorp and all the -- so it's a great high recurring revenue business for us.
Yes, exactly. That was why I was a bit surprised on the uptick here in the first quarter. But it sounds good, if it's sticky. Another question here, more negative tilted one maybe on ATDBio, which is down 43% year-over-year. Could you comment anything on what's going on in that business?
Yes. I think that, that is just to say it is lumpy. It's a lumpy business. It depends -- its order intake, we're comparing against a very high quarter 1, 2023. So, I think what we've got to do with the diagnostics, as well as the startup businesses is this, is really kind of look at more of a trend rather than a particular quarter, because a particular quarter is dependent on kind of order intake and being able to recognize revenue. So let's give those businesses a few quarters to see kind of real trends rather than necessarily get worried or not by just one particular quarter.
And then just a question on Astrea as well. I don't know if you answered it before. But I mean, it's backed out here the Q2 numbers last year from Astrea it seems to be around SEK 84 million. And on the seasonality side in Astrea, is Q1 and Q2 usually similar sales levels or do they differ a lot?
Its, again, we've got to see more trends to give you that. Maybe kind of if we're here next year at this time, we can probably start giving you more reliable commentary. So we'll have more of a history of what the normalized trends and phasing of Astrea are.Obviously, it's a growing business. It's getting new customers. We just need to see how that's developing and how the customers are giving orders. I mean, I think others have commented, Danaher and so on, about gradual return of customers and coming back.So, we still think, as we said previously that it's going to be more weighted H2 than H1, and we feel comfortable with our kind of total yearly target. But, it's going to be --
Just a question -- were you surprised by the 78% growth in Astrea entering Q1?
It's nice. I'm not going say -- I'm not going get to run the commentary back and whether we're nice. Yes. We were happy with it.
Yes. And if I may, just one on Small Molecules as well. I mean, sales down to the lowest level in quite a while. And I understand that China is much behind it, but I also noticed America is down a little bit. So I was wondering, do you feel like a run rate around SEK 140 million in sales per quarter. Is that roughly where it should be? Or is it potential to increase going forward?
I would say the following. We would absolutely like to see that the trend is growing. And we know that there is a lot of work to get that going. There are also pockets of areas where we absolutely can grow going forward. And we, of course, also, let's say, working with getting some more products out, so we are still developing products in the area of Small Molecules, our instrumentation platform. Hopefully, within not too distant future, you will see some news coming out on that area. So, would we like to see a better baseline? Absolutely, and we are working on it.
Sounds promising. See you in Cambridge then Torben and Andrew.
Yes, looking forward to it.
The next question comes from Mattias Haggblom from Handelsbanken.
Mattias Haggblom, Handelsbanken. So 2 questions, please. Firstly, while you've said a lot about what Astrea did in the quarter compared with last year, why you can't see how you feel about Q2 yet, but maybe a year from now, maybe more about seasonality.Is there anything you can say in terms of customer concentration or the opposite diversification for us in the quarter? Anything that changed during this quarter compared to, for instance, Q4?
No, I don't think there's anything materially different about Astrea business in Q1. Obviously, our whole commercial strategy is to expand that customer base and drive further diversification. But that is more a medium-term thing rather than just an immediate quarter issue. So it is a similar business to what we saw last year.
But I would like to also, as Andrew alluded to, we are increasing the customer base quarter-by-quarter and by that gives us better opportunities going forward to have a better view that we -- it's not that -- of course, we never give you any prognosis. But we're still on a learning curve also to see how the seasonality is.But, of course, it's getting better and better than more customers we get and the more orders of some significance we can get from these customers. But it is still -- we are really looking at this business on a yearly base to see if we are satisfied with the growth that we are thinking we will get.
That's clear. Anything you can say about book-to-bill for Astrea? Or is that not a useful for us?
I think, Mattias, it's probably too early, that business is too early in its growth trajectory to use book-to-bill. But book-to-bill is a good ratio for kind of stable established businesses. I think it would just be a fairly meaningless number right now.
Got you. And then finally, ahead of the Capital Markets Day here coming up in May, what in particular, is the ambition to get across to the investor community joining on site? I mean, what, in your view, remains a gap in terms of perception to better understand Biotage? Any commentary that would help me frame the expectations that would be appreciated.
Well, I can go first. I think -- yes, I think what we wanted, obviously, to have it in Cambridge is to -- for people to get more of understanding of Astrea, kind of actually see it, see -- physically hold products, hear from our great leadership in Astrea about the kind of the exceptional growth journey they're on and what products and technology they have. But also kind of a wider Biotage, how our business is evolving, how we're positioning our business to kind of win in the markets. So, it's kind of a holistic view. But, obviously, in Cambridge with a slight -- and much more of an emphasis on our biologics business.
And I would add to that, it's also to get exposure to other parts of my management team, that you don't have to listen to Andrew and me all the time. Get also some of the people that are doing the job in the machine room every single day. That they have a chance to meet with you guys. And so, they will be more exposed than anyone else in that setting. And of course, as Andrew said, to look at what we believe is a very, very bright future from a technology that is not even out there yet really. It's just at a testing phase. And therefore, we took the decision to go to U.K.
The next question comes from Odysseas Manesiotis from Berenberg.
One for Andrew first. So Andrew, you said that current market forecasts were in line with your expectations for Astrea. I just wanted to make sure what you're referring to, is this sort of consensus which has Astrea or your biomolecules business at SEK 650 million to SEK 700 million for a year? Or is it more like your targets, which imply an annual sort of 30% sales CAGR annually here?
Yes. We don't kind of, obviously, provide guidance. Obviously, we do look at kind of the reports that come out. And me -- I -- whether I kind of fall off my chair or not, I'm not. So we think the current values that people have penciled in kind of probably chime with kind of our kind of views of the business.Obviously, what I don't want to do is kind of get people to say, Astrea had a 78% growth in Q1. Wow. That -- so if I start doing the numbers, we get to a crazy number. So it's providing some bookends so people can -- yes, we've got a good growing business, but let's not get too carried away at this early stage. So that's kind of what I wanted to kind of get across there.
Understood. And could you share a bit of more detail on China, just to help us model here? So, what was it as a percentage of your sales or an absolute number in Q1, and what was it in full year '23?
I think what we can say in a more broad setting is that at a certain stage China was covering 15% of Biotage's business. Now we are below 5%. And with all of the political gains that are going on in the world right now, would I like to see China a little bit better? Yes. Do I want to see them at 15%? No way. Do I want that? Because that's too scary.So there is good and bad things about it, because we're still growing the business and China plays a smaller and smaller role. And it's a strong situation to be in with respect to -- we need to, of course, look at how is our structure in China going forward, because if this continues, that, for instance, U.S. is abandoning any business more or less with some of the big CROs there, then, as you know, they have been our primary customers over the last couple of years. But you just have a bit of a framework. We've gone from 15% down to below 5% today.
And thirdly, so could you be a bit more specific on the peptide benefit here? I understand you launched Extrahera -- your new Extrahera. And you also announced a big partnership at the end of last year, that probably helped. Was it -- what I'm trying to understand, was this a mainly product launch dependent growth, or was there anything market-wide benefitted you here? Is it -- is the GLP-1 situation helping you?
Let me say the following. First of all, we have what we think a pretty unique situation, helping our customers with their workflow of synthesizing, purifying and evaporating their products. And in the front end of the synthesis, the Syro instruments is a parallel to this is that can make 96 peptides at a time. That's very helpful in the customers building libraries. So that's what it is. We haven't right now added some very specific new products to the pipeline. It's just that we are having a good solution for the customers that needs to manufacture quite a lot of peptides.
Understood. And last one for me. On the order front, I understand you don't share details here. But could you at least tell us from a sequential perspective, are orders on an absolute basis grow from Q4 to Q1?
I think in the core business, it's a pretty similar in Small Molecules. The order intake is pretty consistent. If you look at our small molecule business, it's a nice relatively, stable business even with that kind of one of the strength one. Yes, we suffered, obviously, a big fall in China, but had a growth in EMEA and America, so they're kind of counteracting each other, which is kind of a nice position to be in.
And it's also one thing that you have to remember, how is the outlook for, let's say, the internal people to make prognosis and forecast. When you are in the small molecule area, you sometimes don't have 45 days the outlook, because the -- you don't get them to commit to anything. And right now also, it is always in the last minute, okay, now we got the order.I would say we have seen some positive trends in some areas, and of course, we're still seeing, as we have now alluded to quite a few times in this call, that China is not starting to take off in any major ways. But there are pockets in other areas that are seeing some interesting growth in also orders and backlog and quotes.
[Operator Instructions] There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.
First of all, thanks for participating, listening and also your questions. And let me reiterate, I hope to see as many of you in Cambridge in a month's time, it'll be fun and we really have something to show you. So, get over there, and thanks for today.