Good morning, and welcome to the Q4 presentation. Today, it'll be just myself, Jethro Holter, the CEO, who will walk you through the presentation today. We originally planned to take this presentation as a live meeting in Oslo, but unfortunately due to the COVID restrictions it was not possible. Hopefully, for the Q1 presentation in April, we will take this meeting in Oslo then. As this is a virtual meeting, we would kindly ask that you stay muted during the presentation. You can then also unmute your microphones at the end during the question- and- answer session. We also would ask that you switch off your videos as well to maximize the bandwidth for the call. For those calling in by telephone, you can toggle mute and unmute using star six. Let's get started then.
The agenda today, we will start with the highlights, where we go through Q4 highlights and also highlights for 2021. We will have the business update, where we go through different parts of the business and go into a bit more detail on what happened in the quarter. We will look at the financials, and then end with the outlook for 2022, and a little bit beyond, where we'll also give you some updated guidance as well. When it comes to the highlights, what we're seeing is the top highlight for us, and what we're most proud about, is achieving the status as a standalone profitable and high-growth enzyme company.
We have demonstrated, I think in 2021, that we've been able to stand on our own two feet following a divestment of the Biotec BetaGlucans subsidiary. This is something we're very proud about. On top of that, we have achieved our highest quarterly sales ever, coming in slightly higher than we did in Q1, where we achieved NOK 40.5 million. Also, we exceeded our annual sales target, which was originally NOK 120 million, and we achieved NOK 128 million. We have a positive cash contribution, and that continues. We achieved a cash balance of NOK 200 million at the end of Q4.
We continue to drive innovations, and we brought to market three new enzyme products during Q4. At the same time, we successfully upscaled the M-SAN HQ enzyme, and we'll come back to that a little bit later. We also completed the expansion of the new 500 sq m production facility. This is a new state-of-the-art facility, and we opened the doors of that in December and we're operational then. For the business update, we're gonna start with going through the commercial segment numbers, looking at the sales. I mentioned earlier that we achieved our best ever quarterly performance, as well as exceeded our financial guidance for the year. When you look at all the market segments we serve, we had both quarterly and annual growth in each of these segments.
Let's start with biomanufacturing. When you look at biomanufacturing, we grew by 29% for the quarter compared to Q4 2020. Annually, we grew by 13% versus 2020. Overall, the biomanufacturing segment made a contribution of 29% towards total Q4 sales. The main growth driver has certainly been the non-COVID related sales, has really driven this. What we have seen is that certainly, as we saw in Q3, we see that customer activity engagement has mostly returned back to normal in all regions. The only exception is Europe, and the reason for this, we still have a few customers who continue to prioritize contract manufacturing of coronavirus vaccines.
Over the past year, we have put a greater emphasis on the Asia-Pacific region, and our efforts are certainly paying off, where we're seeing customers adopting SAN products into their development programs, as well as we're seeing very good sales as well in the molecular tools as well. Since we do not have direct presence in Asia-Pacific, except for Japan, we're certainly focused on creating a network of specialized distributors. We have representation today extending to China, Hong Kong, Singapore, South Korea, Australia, India, and Thailand. We're looking to expand that even further. In Japan, it's a little bit different because we've had presence in Japan for many years. There, we've had our own business developer working for us.
We also have a small network of specialized distributors, sales agents also helping us there. To give you some idea of the contribution of Asia for the fourth quarter, Asia, that was 18% of Q4 sales. So sort of gives you a kind of, you know, how much business is that we have in Asia. So beyond the SAN products, there is interest in our other products for utility and biomanufacturing. One interesting product which is gaining attention is our proteinase are for potential use in RNA therapeutics and cell therapy applications.
When it comes to the combined research and diagnostic segment, and this is served by all of our enzymes, that is including SAN as well, the SAN enzyme is also used in next generation sequencing technologies. For this segment, this combined segment, we're gonna change the name, and we're gonna call it in the future molecular tools, because that's basically what our enzymes are. They're tools that are used in research and diagnostics. When you look at performance, we achieved quarterly growth of 123% versus Q4 2020. Annually, we achieved 54% annual growth versus 2020. When you look at the contribution to Q4 sales, research contributed 32%, diagnostics 39%.
If we go a little bit deeper and look into research, what's going on in the research, so what we see is the trend remains as we've seen in the last three quarters, where we see the gradual reestablishment of business to pre-pandemic sales levels. We see that the customer engagement is very much back to normal with existing customers as well as with new customer opportunities. What we're seeing now is with our recombinant Shrimp Alkaline Phosphatase, in short called rSAP, we've achieved record high of sales this year. For the quarter, we exceed the expectations of sales. This is with our largest customer and also other key customers.
That's important because, you know, there are other customers as well that buy this enzyme as well. We think the reason behind the elevated sales that we're seeing towards the latter part of the year is very much linked to the utility of the rSAP enzyme in Sanger sequencing to identify COVID variants. However, it is not possible for us to quantify its contribution at this stage, how much of this is going into COVID-related sequencing. To give you some flavor of, of also you know, the last year where we, what we consider normal sales for rSAP back in 2019. If we compare 2019 to 2021, sales increased 59% compared to 2019.
It sort of gives you a kind of flavor how it sort of increased. In diagnostics, growth is largely driven by Cod UNG and the dsDNase enzymes. Cod UNG for the quarter, we had our second-highest quarterly sales of Cod UNG for the year. For the DNases, we've had our highest ever sales for the quarter for DNase sales. DNases, our dsDNase, they are mainly utilized in RNA-based diagnostic tests and other applications such as sample prep and things like that, where you need to remove unwanted genomic DNA or double-stranded DNA. DNases is like a nuclease, similar to the SAN enzymes, which are nucleases. Nucleases certainly have broad utility.
For both Cod UNG and the dsDNase products, we achieved our best ever annual sales for these products. Last quarter, we mentioned that we were gonna provide several prototype enzymes and release these to customers to gain early access for testing. This was well received by the market. Numerous customers took advantage of this, where we've provided them samples, and customers now have ongoing evaluations of those enzymes. I'd like to shift gears a bit and talk about corona-related sales. What you see here is, for the quarter, corona-related sales made a 23% contribution to total Q4 sales. For the year, it made a 26% contribution to annual sales.
When you look at the quarter, what we're seeing is that we have had an increase in Q4 sales compared to Q3, and this correlation very much correlates with the demand for testing following the Omicron outbreak, which sort of makes sense. With respect to coronavirus-related sales, I think that the company does not have full visibility here and the numbers what we provide here are estimates, so there can be a plus and minus there. Also the impact of coronavirus sales is becoming increasingly more difficult to quantify, particularly as further products are being utilized in coronavirus-related applications.
For example, I mentioned earlier the recombinant Shrimp Alkaline Phosphatase where we suspect that it's related to its utility in sequencing of coronavirus variants, and again, you know, why we suspect that is because, you know, we've had information from our customers mentioning that. In future it's important to look at this and see where coronavirus sales are going, and we believe they will remain and be an important part of the underlying business moving forward. Post-pandemic, we do expect the sales will gradually decline to a kind of new steady-state level, but it's reasonable to expect that fluctuations will be triggered as new variants emerge.
It's gonna be with us for the long term, but we do consider it part of the normal business moving forward. When it comes to vaccine-related sales, they continue to represent a minor contribution to COVID-related sales. However, we do expect this business down the road to have a noticeable impact on sales revenues. Of course, this is subject to customers achieving successful clinical trials, but the potential is certainly there. Let's move on to innovations and new innovations represents a key driver for continued and accelerated organic growth. Q4 was very busy for the innovations team and what you can see here is a photo of Dr. Olav Lanes, who is our VP R&D and Applications, and he leads our innovation efforts.
To the right of him, you can see several of our PCR machines. Through the work of his team and others in the company, of course, we launched three new products during Q3. The first was ArcticZymes R2D Ligase, and actually, now people are calling this R2D2 out of Star Wars, so it's kind of really now has sort of made a noise out there. This is a patent-pending ligase with novel specificity enabling ligation of DNA to both ends of an RNA using a DNA splint. The enzyme is there.
The enzyme is an enabling tool for new technology development, and we expect it'll have broad applicability in molecular diagnostics, next gen sequencing, DNA and RNA synthesis for potential therapeutic applications. The second enzyme is our IsoPol BST+, high concentration glycerol-free DNA polymerase. This enzyme was important because this was to support ongoing customer opportunities for utility in next generation sequencing technologies and point-of-care test development. The important thing here is two things. One is the glycerol-free formulation. That's important because if you want to dry down or lyophilize an enzyme in a cocktail of reagents, then you need to remove the glycerol. Again, it takes some magic to remove glycerol from enzymes.
The second part is since you're drying down these reagents, and the enzyme, they then need to be highly diluted, and then in order to have high reactivity and have fast reactions, then you need enzymes in a highly concentrated form. A lot of innovation goes into making enzymes at high concentration. It gets much more difficult to make products as the concentration gets higher. A lot of innovation and magic goes into providing enzymes at high concentration here. The third product was the M-SAN HQ ELISA kit, and this is a new immunoassay product, and it is an essential support product for customers using our M-SAN HQ enzyme. Again, this is targeted towards the biomanufacturing processes for gene therapy and viral vaccine production.
In combination with the M-SAN HQ enzyme, the immunoassay product provides a complete solution offering to our customers for the critical elimination of nucleic acid contamination during biomanufacturing. We also successfully upscaled the M-SAN HQ enzyme and what we did was to transition this to a large scale fermentation process where it achieved greater than a 100-fold increase in yield. This was important because we had to coincide the launch of this upscaling with the launch of the ELISA kit to ensure that ArcticZymes could meet future demand and provide large quantities of enzyme from a single production batch. Future innovations are progressing, and these are important because these will synergize the product offering of novel and high-quality enzymes that we have.
The enzymes that we have in the works are reverse transcriptases, more DNA polymerases, ligases, nucleases. Remember, nucleases are SANs, the DNase-type enzymes. Proteinases and other enzymes. Some of these innovations will represent new products during 2022. Discovery activities have also been initiated towards RNA therapeutics. We aim to launch the first enzymes for RNA therapeutics during 2023, and of course, more in subsequent years as well. When it comes to operations, we successfully completed the new 500 sq m production facilities were finished, and we opened the doors in December for operational activities. The old facilities are now closed down. This was at the old Nordøya site, and now those are fully occupied by Biotec BetaGlucans.
The new state-of-the-art facility was designed to cater for scalable manufacturing of enzyme products to support our organic growth over the next four to five years. The new facilities conform to the strict requirements demanded by GMP and ISO 13485, which is related to in vitro diagnostics. Even though, you know, we don't make diagnostics or therapeutic products ourselves, it's very important that we manufacture according to the same standards that are, as a component supplier, that are needed for GMP manufacturing and IVD. That's why these manufacturing standards are important to us. Also, what's important now is that we have all employees in Tromsø now located under one roof at the SIVA Innovation Center, rather than being on two sites.
This will allow us to work more efficiently than in the past. I think it's also good for the employees to be together at one site. You have a much better team spirit being together on one site rather than two. ArcticZymes had an external audit for ISO 13485 recertification. This also included audit of the new production facilities. The audit was successful, and ArcticZymes Technologies was recertified. You sort of see a photo here to the right with some delighted and proud colleagues from quality assurance and operations holding the new certificate, which was issued in January. I think as an organization, everybody played their role in achieving this recertification.
I must emphasize, this certificate is essential for our long-term continuity of business with in vitro diagnostic customers, as well as attracting new business from potential diagnostic test developers. Something for us to be very proud about. When it comes to strategic growth initiatives, the company remains committed to executing on its strategic growth initiatives. When it comes to organic growth, we are in the process of establishing a laboratory in Oslo, which will focus on application development. We talked about that last quarter, and this is progressing according to plan. We do expect to be operational within Q2 2022, where we will also have on board two to three scientific staff, and that'll be our starting point there. In organic growth, we have certainly worked on intensifying activities towards acquisitions.
We have discussions are continuing with several early acquisition targets and we are making steps forward there. As well, we have expanded the target search and to search for new potential targets in both the market segments we serve, as well as beyond European borders to include North America. Again, we mentioned last quarter that we commissioned a specialist consultant to support our search efforts, and this project is ongoing. I'd like to take you through the financials and normally Børge would do this, but I'm doing it today, so maybe you get a different take. Let's start with the sales.
We did talk about sales earlier, but overall, what we've done, what we've seen is we've experienced growth in both the biomanufacturing and molecular tools segments. Overall what we can see is sales have increased 84% for the quarter compared to the Q4 2020. We achieved NOK 40.5 million in sales versus NOK 22.1 million in the same quarter the previous year. What we see is currency continues to have a negative impact on underlying sales growth. Actually, when you calculate it, we had a headwind for the quarter of NOK 2.1 million, and actually for the full year it was NOK 10.7 million. Headwind we have had related to currency, and majority of our business is done in U.S. dollars and euros.
Of course, we are influenced by currency. In the biomanufacturing segment, which is served by the SAN products today, we achieved NOK 11.6 million in quarterly sales, versus NOK 9 million for the same period the previous year. We grew by 29%. In molecular tools, we achieved NOK 29.2 million in sales versus NOK 13.1 million the same period the previous year. That's an increase of 123%. When you look at the quarterly sales for the last two years, you can see that the sales do fluctuate, and I must stress that this is a normal part of our business and moving forward, you will see quarterly fluctuations in the business. We talked about COVID-related business earlier.
What you can see from quarter- to- quarter, again, this has fluctuated and of course, the demand in the supply chain has certainly been up and down during the last two years. This is no exception for Q4, where we're seeing the second-highest sales for the year. Of course, we had stronger sales in Q1. There is a kind of correlation here where the increase in sales does correlate with the demand in testing following the Omicron variant outbreak. For Q4, we ended up achieving NOK 9.3 million. As mentioned before, you know, towards the future, we do expect a gradual decline to a new steady state in sales.
That will be with established customers that we have now. We do expect there will be fluctuations which will be triggered by new variants as they emerge. It's kind of what we've already seen in 2021. Overall, we do expect coronavirus to be part of the underlying business following the pandemic and coronavirus will be with us for many years to come, but as an endemic threat. We've talked about this the last three quarters where we introduced this new graph, which shows the 12-month rolling average quarterly sales. The reason why we did this was to sort of eliminate some of the quarterly fluctuations and show you the growth trend in the business.
As you can see in the graph here, we have continuously had a positive trend over the last three years, where sales have almost grown constantly quarter by quarter. If you just go back in time, at the low end at the end of 2018, our average quarterly sales was NOK 7.5 million. Now, they're in excess of NOK 30 million in average quarterly sales when you take into account the performance we had in Q4 this year. Oh, sorry, in last year. When you exclude COVID-related sales, there's a similar growth trend, a little bumpier. However, when you look at the average quarterly sales, they're now in excess of NOK 24 million.
Looking at the profitability side of the business, we achieved an EBITDA of NOK 20.8 million versus NOK 6.8 million for the same quarter the previous year. At the end of the day, we increased the EBITDA by NOK 14 million. When you look at the EBITDA margin, we achieved 51%. The increase really comes down to a strong quarterly sales performance of NOK 40.5 million, as we mentioned earlier. Although we had the highest quarterly sales ever, our expenses have increased by NOK 1.8 million. That's compared to Q4 2020. The increase largely comes down to mainly the personnel. We have invested more in personnel, and that's important to organic growth.
You know, for our business, it is our greatest asset are our employees, the talent that we have in this company. Of course, we will continue to invest in talent as we move forward. We also have an increase in commercial activities, which means travel costs and attending conferences and trade shows. We know we're spending on that again. That's kind of going back to business as usual. We certainly attended several trade shows during the quarter, and that was well received by customers. Actually, what we're seeing is these trade shows have been very well attended as well. We've been out to meet existing customers as well as new potential customers as well.
Of course, it's important to invest and spend to attend these events. When it comes to cash flow, as with previous quarters, the cash flow remains positive, where we have a change in cash of NOK 40 million for the quarter. For the full year, it was NOK 60 million for the whole year, where we end up with a cash balance of NOK 200 million by the end of the year. When you look at the graph here, you can see there's a major spike in our cash during the fourth quarter of 2020.
For any of those of you who don't remember, this was associated with a divestment of Biotec BetaGlucans, where we received NOK 70 million at the end of 2020, plus a further NOK 16 million at the end of Q1 of 2021 for that divestment. Overall, when you look at the enzyme business, it made a net cash contribution of NOK 44 million in 2021. We mentioned it earlier in the presentation that during 2021, we invested in the new state-of-the-art production facility. This included infrastructure changes and purchasing a lot of new equipment. Overall, we spent just over NOK 11 million to complete this project. I'd like to go to the last slide and take you to the outlook.
What we do is give you the outlook for 2020 and beyond, and we come with new financial guidance here. For 2020, our annual guidance here is that we have an annual sales target of NOK 155 million. This does take into consideration the expected impact from coronavirus-related sales. I mentioned earlier about quarterly fluctuations. These will continue in the business. You know, our sales will be choppy quarter- to- quarter. This is very much inherent and normal for B2B businesses such as ours, so we strongly urge you to focus on our annual and long-term targets here. We do expect the contribution from coronavirus sales to be lower in 2022, and this is to be expected as the world transitions to a post-pandemic status.
However, as mentioned earlier, we do expect coronavirus sales to remain part of the underlying business in the long term. With respect to R&D, we will be expanding our activities beyond Tromsø into the Oslo region, and you'll hear more about that in forthcoming quarters. We will continue to launch new products. There'll be more products launched this year, as well as, upscaling the manufacturing of relevant enzymes, such as one such enzyme is the proteinase, which we are working on upscaling right now. We'll continue to hire new people into the company too and talent acquisition. This is really important to, you know, keep building the team in order to support our short and long-term organic growth activities.
We're also gonna focus very heavily on mergers and acquisition activities. This will be a priority for us with a goal to secure a deal within 2022. Longer term, we have a goal to realize an annual sales potential of NOK 350 million by 2025 through organic growth activities. This is where we'll focus on growing both the molecular tools and biomanufacturing segments. At the same time, we want to invest to capture longer-term potential from expanding the biomanufacturing offering into other attractive areas such as RNA therapeutics. For this, we will need to certainly invest more in personnel, in particular to achieve that goal when it comes to expanding into RNA therapeutics and other related areas.
With that, I think that's a good place to stop. I want to thank you for your attention today. We open up for questions. Anybody calling in by phone, you can unmute using star six. Thank you.
Hi. Can you hear me, Jethro? It's Peter.
Yes.
I'm sorry, I hadn't plugged in the cord correctly in the socket. Just a couple of quick questions. First, I assume that since the Omicron variant is still rampaging around the society, 2022 has continued at a high level when it comes to testing and so forth.
I think, you know, here, you know, we'll see coronavirus sales continue. That's part of it 'cause we have established customers and already, you know, who have tests out on the market. Of course, the way testing is done and what things are doing are changing as well, and that's why I think now we're starting to see, for instance, rSAP, the shrimp alkaline phosphatase being used here in sequencing variants. 'Cause, you know, PCR, when you do a PCR test, you know, that's great. You use Cod UNG and you can use Cod UNG and other enzymes in that.
Again, you know, that's not necessarily looking at all the. You know, that doesn't tell you what variant you have necessarily, unless you've specifically designed it for a particular variant. Sequencing allows you to sequence the different variants here and identify the variants. I think you're moving forward, you're gonna have a range of technology and kind of tests where you're looking at, okay, how much virus does somebody have to kind of monitoring surveillance of corona and finding new variants and just generally monitoring what's there. A range of different technologies are gonna be required in the future. And that's why with ArcticZymes, we have different enzymes that can fit into these different technologies, and that's what we're seeing now.
Of course, having visibility, having full visibility is not something that we will ever achieve here. That's why it's getting a bit more difficult to give absolute numbers on this. I think, you know, the important thing is moving forward, we do have several enzymes now that will support that and, you know, coronavirus testing monitoring is gonna be there for years to come. You know, that's not gonna be going away. I think, you know, long story short, yes, we will see sales this year, but we don't anticipate them to be as high as they were in 2021.
Okay. Just a quick follow-up to that, then I move back to queue. The FDA has currently given emergency use authorization of 291 molecular tests.
Mm.
Do you have a visibility how many of those tests your enzymes are included in?
No, absolutely not. You know, it's kind of, you know, yeah.
Well, let me put it like this. Do you have visibility when customers purchase-
Mm
Enzymes from you, do you know if they will be included in a COVID test or another diagnostic test?
Sometimes, we won't know how much because often, remember, sometimes a lot of business we have are with existing customers who then where some of our enzymes will go into multiple products. Of course, you know, when you're dealing with a lot of these organizations, the procurement person or who you work with, they don't. They buy it in, then that is then split out and goes in different directions internally. Of course, when you work with small companies, you get more visibility. When you work with large companies, you don't have that visibility. If you're working with a...
For instance, you know, some companies we can work with could have over 50,000 employees, you know, and trying to get visibility of how they're gonna split and where this is going, you don't necessarily get. They don't have that internal visibility either. In these large organizations with some companies you work with. I think here that's why as a B2B supplier, you know, you don't get full visibility, particularly when you work with the larger companies, on how that's split. Of course, sometimes you're shipping to multiple sites as well, and then internally they will ship it around internally, as well.
That's why, you know, it's being at the front end of supply chain, you don't have a visibility all the way down to the end user. That's part of the business. Sometimes you do with smaller companies, and sometimes you do with some partners that are large companies. As business matures, you don't have that. That's why it's difficult. I know we get asked these questions a lot, but we don't have that full visibility.
Okay. Thank you. Yes, through. I'm sorry for not saying it. A very great end to 2021. Thank you.
Yeah. Thank you.
Hello. I don't know whether I'm live or not.
Yes, we can hear you there, sir.
Oh, that's fantastic. My name is Henry Reed, Euronav Asset Management. I've been invested in your company for about a year now. Just, I had a couple of questions relating to the longer term treatment of shareholders in terms of being a very high operating margin business, you will throw off a lot of cash going forward. You've already talked about M&A, you've talked about investment in a new lab in Oslo. I'm just wondering at what point you also talk about dividends and how you see using your 2025 target, how you see a breakdown of how you spend your profits and how you intend to reward your shareholders?
Yeah. I would prefer for my CFO to answer that question. I don't have him here today.
Sure. You.
That is certainly a question that I should actually leave to the CFO at this stage. What I can say is, you know, what we want to do is, of course, we are looking to grow the business inorganically. What I can say there is, of course, when we want to do a transaction, we want to, you know, over time, we're not looking at potentially doing one, we wanna do several transactions down the road, so we can really build this company. Of course, you can do the calculations.
You know, we have today NOK 200 million in the bank, and depending on acquisitions that we do, you know, we will be considering the options there that we need to do in order to make those transactions happen. But of course, in terms of, you know, dividends and that, I think I should leave that to our CFO to address. But I will make sure we address it in the Q1 presentation. I hope that's okay.
Yeah. Okay. Maybe just a quick follow-on question whilst I've got you. Just to understand better, where you are in the marketplace, vis-à-vis your competitors?
Mm-hmm
Could you, I mean, you're obviously a very small manufacturer of enzymes still, but, you know, who is out there? Who are you, who are you fighting? Do you have to sell your products at lower prices in order to gain market share? How do you see yourself developing in the U.S. market?
Well, actually, I think that there's a little bit of a misconception, so I appreciate the question. No, actually, in terms of our scale and what we do, we have some of the largest and state-of-the-art manufacturing in the world, when it comes to the B2B supplier of certain enzymes. So we have the scale of certain enzymes to meet global supply demands of certain enzymes. For instance, you know, in terms of shrimp alkaline phosphatase, that's an example of a gold standard enzyme used in Sanger sequencing. We're the world supplier. Nobody else makes the enzyme. They haven't been able to do that anyway in the past due to patents and things like that.
Also the know-how we have. I think we are a world leader as well with some other world leaders with the top companies as large top companies as well. In terms of our business in the U.S. at one point that was our largest. It goes backwards and forwards because we work with a lot of international organizations and sometimes the products will ship to the U.S. sometimes instead they will take it to Europe that they change things. But generally sometimes the U.S. has been our strongest. Other times it's Europe. It depends on how shipments go. We're extremely strong in the U.S.
With that, in terms of we have a business development team where I have dedicated people in the U.S. who are doing business development. Today, we have over 300 customers, and a good proportion of them reside in the U.S. We're very well established in the U.S. We have a warehouse in the U.S. as well. Our inventory comes from Tromsø, is stored in the U.S., so we can mobilize products very quickly to our customers. We're pretty well established there.
Great. Thanks very much.
Thank you.
Hello, Jethro. Can you hear me?
Hello. Yes, I can. Yes.
Congratulations on the good Q4 results.
Thank you.
Great to follow you. I have a couple of questions also related to the one you just got here, but,
Mm-hmm
... if you can answer a bit on the prices and how much you're able to raise them.
Sorry, that's an important one. Sorry, I forgot that question. Thanks for bringing that up. Yes, when it comes to prices, you know, remember, you know, our enzymes aren't cheap, and there's a reason for that. Our customers still see that they get value for money because of the value proposition we bring to the table here. You know, what we're doing. Our business is about serving other companies and being a critical raw material supplier. In many cases, there aren't alternative enzymes, especially when you have unique features like ours in our enzymes. There isn't another offering. Our customers have to trust us 110% as a critical raw material supplier. It is.
To do that, you know, you can get a good price because at the end of the day, what you're doing is you're providing your customer with a novel solution. You're also providing them with a very robust, high quality product, which, you know, when you manufacture it in 10 years' time, it's the same as it is today. That's what makes you a premium component supplier. Also it's about supply security. It's that scalable manufacturing where you can grow with your customers so they can meet the demands of our customers and don't put them on back order. That's why customers are willing to pay a premium for that kind of level and quality and service. That's what excellence is about. That's how we differentiate ourselves.
Yeah, we want to be that premium component supplier to the industry. That's how you forge those long-term relationships and business with the customers. You know, today we're not a company that focuses on a lot of kind of generic everyday enzymes. We focus on novel and high-quality manufactured components. That's how come, you know, we can maintain a good price for our products and customers are willing to pay that and see they get value of money because that way they know they can rely on us 110%.
Right. And the percentage of your or the input price for the end customers' products from you, it's very low, right? It's in the single digit.
Well, I will not comment on that because, of course, that's exposing our customers. At the end of the day, yes, B2B, when you look at the end and what an end user pays for a small tube like this, of course, the prices are low. Remember, you know, as a component supplier, pricing is very different. You have bulk pricing. Yeah. Basically, you know, what you need to do and each business opportunity is different. What you need to do with your customer, it's really a, you know, it's why it's kind of true business development. It's really about you work together with your customer. You know, they've got, we've got a common challenge to solve. That's, well, how do we make these technologies work? We have to make them have the best technology on the market.
And then, when it comes to price, it's really about we need to have a price where it creates a win-win situation. If our pricing is too high and they're not competitive on the market, nobody wins. Of course. I think here we work together with our customers to make sure that our components are also affordable so they can bring their technologies out to market as well. I think there's always a dynamic around pricing, of course. It's also how we negotiate our contracts as well, because it also depends on the intended use of the products, the geographies they intend to sell in, you know, and all that. We got to create a situation which is a win for our customers and that makes a win for us. I think it's dynamic.
Just two more questions, first on the 2025 guidance there, if you can provide some ballpark figures or thoughts on the different business areas and how much percentage of each of them you are thinking, and also for geographies?
Well, I think at the end of the day in geographies, you know, we're a global business and we see growth in these areas in biomanufacturing. We see growth in all regions, all corners, of course, and also Asia as well. That's why I emphasized Asia, because we've been in Japan for many years. Of course, we haven't tapped into the rest of Asia. We're working on Asia much more, and we'll continue to build that out both for our biomanufacturing and for the molecular tools. In terms of, I'm not going to split the numbers up, but I think, you know, the kind of growth trend we've had, you know, we want to continue the growth trend and increase that for both of those segments. Each one has a different dynamic.
In both cases, we want to build the portfolio out for both enzymes and the offering we have for the molecular tools and the biomanufacturing. Of course, we want to expand biomanufacturing even more by moving into new areas such as RNA therapeutics. There, you know, there is a lot of potential there. Hence it's still early days for us. We are just starting out in RNA therapeutics and we hope we plan to have the first enzymes on the market in 2023. Of course, as we move forward, we will continue to update our guidance. It's not a static thing. As we see more happening, we will make updates down the road. I'm not, you know, we do not plan to split it out at this stage.
Surely. If we imagine us talking in the Q4 call for early 2026 and you're far off this track, that, of course, you're going to change the guidance. Now it's NOK 350 million. What could be the reasons why you would be far off from that number? What do you think would be possible explanations?
That's a good question. Remember, I think, you know, that there's two things. One, when you look at the molecular business, you know, that's kind of a predictable business because, you know, at the end of the day, this is where most of our customers will always get to market and launch a product. But you know, it depends how successful then, you know, after that, it's really how successful they are on the market. In biomanufacturing, it's different because what you're doing is you're selling the enzymes into companies who are developing a therapeutic. Then you're dependent on if their clinical trials are successful or not.
At the end of the day, when you look at us as a company, we're serving a lot of companies that are developing those therapies, but you know not all of them will be successful in clinical trials. You have a critical mass of customers and getting new customers on board that are, yes, it's fine, we know people are gonna fail, but the business is still gonna grow.
The only thing I think that would really put a real spanner in the works there would be, for instance, let's say there was some adverse effects of viral vector technology, or as we enter RNA therapeutics, something, some adverse effects that actually, you know, said, okay, this puts the brakes on the use of the technology on a global perspective, you know, would certainly have a major impact. At the end of the day, remember ArcticZymes, it would have an impact on the business, but it won't kill the business because we are in effectively three different market areas. We're in molecular research, molecular diagnostics, and therapeutics. If one of them was hurt by something like that, we've still got the other businesses.
I think here we do have a robust business, because yeah, it's based on, we're not a one product company. We have many products. We're in three different market areas, so if something happens to one, we have the other two. We have a growing customer base of over 300+ products . Remember our business is long-term, customers are locked in. Once they integrate an enzyme into their products, they're not gonna switch out. There has to be a good reason for that. Of course, yes, there are external factors that can have a negative impact. Again, you know, Corona was an interesting one because Corona had for us, over the last two years, a positive and negative impact.
Since we're in the three different market areas, the dynamics allowed us to actually have a positive impact, a net positive impact due to Corona at the end of the day. I think here, you know, even though things can change, can happen, it would have to be something major that would have a major influence on that guidance. Of course, if we see things down the road, we will certainly update the market. If we see something is going in a different direction which would have a significant impact, of course, we'd update the market on that. We won't sit there and not update you on that. I hope that answers the question.
Very well. Thank you for providing some color and thank you for the long-term view. Appreciate it.
Hi.
I'll jump back in the queue and leave over.
Could you hear me?
Yes, we can. Yes, I can.
Just to follow on, the NOK 350 million 2025 target sounds to me merely just an approximate figure you've given for the output of your new plant. It won't include any acquisitions which you've been-
No.
Which, hinted at, et cetera. Is that correct?
Yes. It's organic growth. It's nothing. There's no acquisitions included in that, of course, because, of course, then depending on what we would acquire, you know, that could vary wildly. You know, so that's why, you know, we only give guidance for organic growth.
Yeah. Great. Thank you.
Thank you.
Jethro, this is.
Yeah, Peter.
Peter Östling again from Pareto. Just two quick follow-ups. Did you say that you expect to have enzyme targeting RNA therapeutics on the market in 2023?
Yes.
What would that be? What kind of enzyme would that be?
We will come with more details, but when you have a look, you need a range of enzymes for making RNA. For instance, you need things that there is a range of enzymes that we're looking at, and we will innovate. I wanna be careful because of course, you know, I don't wanna disclose too much because of the competitive landscape out there. What we want to do is certainly there are enzymes such as RNA polymerases are certainly of interest to us, the kind of capping enzymes, those type of enzymes. There are many other enzymes that are used there, but those are kind of some of the enzymes we're looking at. Of course, we'll talk more about this in Q4.
We will share more details of where we're gonna go here. Today we're very much in that discovery phase. We're looking for novel enzymes that can certainly improve and revolutionize the way RNA therapeutics is done. Of course, you know, finding novel enzymes takes a bit of time, so that's why as well as high quality enzymes. That's why, you know, we can't have anything coming this year. That's why I'm saying the first enzymes will come in 2023. Then-
Are you aiming for the same kind of high quality specific enzyme within RNA like the SAN enzyme for, call it, general manufacturing?
Yes.
It will be as unique as that one?
Yeah. What we need to make sure that they are GMP-grade enzymes. That's as important because that's kind of in terms of our development. It's not just the kind of novel features that we have to put in note. It's also making sure we have the quality and that they're GMP-grade. That takes additional effort as well and all the documentation that goes behind them as well. You know, when you make an enzyme for general purpose use or for research use or diagnostic use, you know, you need less documentation.
If you make an enzyme for use in therapeutics, you need to put a lot more documentation behind it as well.
Yeah. Yeah.
Of course that's what we do there. I think here, you know, the difference is when you look at the SAN story there, what we're doing is we are providing an enzyme that is used in part of the manufacturing process. With RNA therapeutics, you know, of course it's gonna take time. You know, we can't offer it this year, but over time we can build a whole portfolio of enzymes and potentially other components that can be used for the RNA manufacturing process. Because, you know, when you make RNA, you need several different enzymes and our enzymes can certainly play in its place. Of course, in order to do that, we do need to invest and that's why, you know, we need.
What we need to invest in is people. So I think this year we will be investing in more of the team. It's important to invest today in order to capture that long-term potential down the road. Hopefully that gives you some flavor of where we're going there.
Can I just finally go back to the 2025 target? Does the 350 assume that some of your customers have actually come quite far within biomanufacturing to the market?
Yes, it will do. Yes, definitely. I think, you know, that's with the SAN enzymes of course, there.
Yeah.
Of course, when it comes to RNA therapeutics, if we're launching in 2023, 2024, of course not much of that will feature.
No.
That will take time, but of course that's potential for the long, long term.
Yeah.
You know, it's just, you know, it's important to emphasize that I think. Yeah. Basically, you know, remember a lot of what is when you look at 2025, remember that's also a lot of that is also momentum in what we've done already. All the new stuff we're gearing up to do right now in RNA therapeutics is more stuff that will come after 2025, if you know what I mean. Yeah.
Yes. Yeah.
So, uh...
Okay. Great. Thank you, Jethro.
Hello, Jethro . This is Carl from Danske. Can you hear me?
Hi, Carl. I can hear you.
Yeah. Great. Just a clarification question first on the 2022 guidance. Is that fully based on organic growth and it does not include M&A, or how should one see it?
All guidance is organic growth. All financial guidance, there's nothing related to M&A there.
Okay. Just a question on the, you know, you seem to invest a lot into R&D and innovations as you speak about, and I'm just wondering how one should think of this in terms of looking at the margins now going forward and within your outlook range. Should we expect the margins to be continued high at around 40%-50% or what do you see that you can achieve when you grow at around 30% organically? How should one interpret that?
I think, you know, we have some internal margin targets of course, which we're. Of course we're not gonna say, but of course we have to keep an eye on that. We are investing in a team. We're not looking at, you know, dropping and becoming a bit negative here. I think yes, you know how the kind of margins sort of have been, of course it fluctuates quarter- to- quarter. That's kind of what we will be trying to sustain. Of course, what we want to do is make the right choice and invest. Yeah, remember our investments are more in people.
We've just invested in some new facilities, but of course, those go on the balance sheet of course. I think the EBITDA margins will, you know, be maintained kind of as they are as we move.
Okay.
Mm-hmm.
Yeah.
And then, just the last one. Is it possible to quantify maybe the negative impact? You wrote in the report that you had a negative impact in the biomanufacturing segment, where you still have some customers in Europe that are prioritizing contract manufacturing of COVID-19 vaccines. Is that possible to quantify how much that impacted the growth within biomanufacturing in Q4 or is that hard to-
Yes. It is difficult. It can lead us to all the wrong assumptions. I think we've gotta be careful there not to overanalyze those things. I think at the end of the day, what we have seen in 2021 for biomanufacturing, what we've seen and what we've said, you know, the growth has been lower than we originally anticipated going into the year. Again, that's mainly due to what we're seeing in Europe. And of course that's you know, COVID has had an impact on that. We do expect, you know, what we're seeing now that things are getting back to normal now.
Of course, what we're seeing now is that we're also reaching to new customers, particularly in Asia now as well. I think they're there. I guess it's still early days there, but there's certainly the interest and potential in Asia is certainly picking up. I think it's not only, we're not just relying on existing, it's also new reaching out to new regions as well. I think, you know, we'll also see we anticipate the growth trend to pick back up in 2022. Of course we I think, you know, it's also, we've gotta be careful not to be looking at this just focusing on a quarter as it's more looking at the trajectory for the year here.
Things will be up and down in both quarters here, and that's just the nature of the business. You just need to take that and yeah. That's how it will be. We do expect the growth rate to increase this year, for-
Yeah
manufacturing stuff.
Yeah. Very interesting. And then is maybe one more, if we can just talk a little bit about, because you said that the rSAP product is used to identify coronavirus variants, just so we can get a kind of sense of how much this has contributed to net sales during the latter parts of the year and how one should think when we go into next year. Because I mean, if that is gonna drop and the underlying business is still gonna increase a lot, it seems very impressive to reach NOK 155 million if it was kind of, you know, boosted, so to say, in-
Yeah
in 2021.
Yeah. I think it's a good question. I think, you know, you gotta look at this. I think, you know, we've had a boost in 2020 and 2021. We had a boost from Corona. Okay. Of course the underlying businesses continue to grow as well. What we do in 2022, the kind of boost that we've had from Coronavirus is gonna be less. You know, time will tell, of course. At the same time, the underlying business continues to grow. That's sort of what we try to show in the 12-month rolling average quarters where you can sort of see. I think.
Of course, you know, that we also need to factor in that, you know, things are also returning back to normal in some areas. That kind of puts those dynamics together, and that's how you come to the NOK 155 million there. Of course, we will expect a you know more contribution from the underlying business, a lower contribution from the COVID. You know, we can't be sitting there, you know. Say we gotta make up for the drop in what we anticipate from the COVID sales as well.
Okay. Very clear. Thank you.
Mm.
Okay. Now thank you for all the good questions and the time today and hopefully next time in Q1 we can have a live meeting with some investors there in Oslo. But we'll keep you informed about that. Thank you again and have a nice day.