Good morning, good morning everyone, and welcome to ArcticZymes Q1 2025 presentation. My name is Michael Akoh, I'm the CEO of ArcticZymes, and today I'm joined by Børge Sørvoll, our CFO, as well as Paul Blackburn, our VP of Sales. As we present our Q1 2025 results, I want to start with a clear message. Despite some short-term headwinds, ArcticZymes is making strong progress in our strategic customer transformation. Revenue this quarter was impacted by a temporary drop from a major OEM customer within molecular tools. Looking beyond that, the underlying momentum in our business is clear. We're deepening our customer relationships, we're expanding our market reach, and this quarter we hit a record high number of orders, 342. Apart from that, we're also expanding our customer base. Our customer base also hit an all-time high. In the US, we are seeing a lot of positive momentum.
Sales were up 25% year- on- year, fueled by growth in the cell and gene therapy space. Notably, a new CDMO also took on SAN HQ on their platform, a strong signal of future reoccurring business. We know that transformation takes time. The investments we're making in our team, system, and global footprint are deliberate and essential. Simply put, we're laying the foundation for sustainable long-term growth. In today's presentation, we're going to focus on showing how our strategy is progressing, talking more about our customer-centric transformation, and also sharing the early indications that this strategy is bearing fruit. We are also going to underline that we believe that ArcticZymes is well positioned for future growth. With that, let's go into the agenda, Børge.
I'm going to start off like normally with our highlights for the quarter, then I'm also going to recap our strategic priorities, and then I'm going to give you an update on partnerships. Then Paul is going to share an update on our customer-centric transformation and also give you insights into the progress we are making in terms of developing our customer base. Paul is also going to share the sales numbers on both segments, biomanufacturing and molecular tools. Børge is going to go through the financials, and then I'm going to come back with an outlook and open up for questions and answers. Looking at the highlights for the quarter, then the total revenue was just shy of NOK 25 million. The revenue was negatively impacted by a large molecular tools customer that ordered NOK 9 million less than they did during Q1 last year.
Nothing materially has changed with this customer. Paul is going to give you an update from his latest discussion with this particular customer. Taking away this customer from the equation, both Q1 last year and Q1 this year, then we grew just above 12%. The EBITDA performance was negatively impacted by currency effects as well as investments in our commercial transformation. More details on that during Børge's part of the presentation. I'm extremely pleased to see that yet another CDMO has onboarded one of our SAN nucleases, SAN HQ, in their platform process. It's a leading CDMO in the US where we have been working with them for the past couple of years, actually, and now finally we have been able to make the breakthrough. This is the second CDMO where we onboard in their platform, expanding our reach to much more customers.
Also in the US, we saw a very positive development during the quarter. We saw strong growth within the cell and gene therapy space, our nucleases, and sales are up 25% year- on- year. In general, I can say that we are having a lot of great dialogues with customers. We are seeing a lot of opportunities for the future. What I am also very, very pleased to see is that our customer base continues to grow. This quarter, we had a record high number of paying customers. This really lays the foundation for future growth. We are getting in early at a lot of accounts. The volumes might not be large at start, but there is significant potential to grow long-term. A really, really positive development both within the cell and gene therapy space and also in terms of the general customer base expansion.
Scientific thought leadership, that's key for ArcticZymes. We want to be positioned as one of the strong scientific thought leaders out there. Our products need to be backed up by science. We presented a poster in collaboration with ASEP at Bioprocessing International on one of our SAN enzymes, and this was very positively received. Next slide, Børge. Our strategic priorities. We are going to continue to drive the customer-centric transformation. We're going to continue to work with commercial excellence. We're going to continue to get closer to the customer. As mentioned, we are seeing the first early progress in terms of delivering on that strategy. All-time high customer base, all-time high number of orders. Channel development through partners is also important. Two CDMOs onboarded, and we're working with a third as we speak. We're also looking into possible distribution partnerships.
In order to build the customer base, as we have done and continue that development, we are also investing significantly in marketing activities and sales campaigns in order to generate more leads. Paul is going to discuss and show you our latest campaign and also share some very tangible results of that campaign. GMP upgrade of current enzymes. That's been a theme ever since I joined the company. We've been working on that for the past two years, first with the DMF and then with developing and launching our first GMP-grade nucleases. We have a third in development, and that's our flagship product, M-SAN HQ, and we expect that we're going to be able to launch a GMP version of this product in a couple of months' time. It's essential to complete this regulatory run.
In order to get into more late-stage drug development projects, we need to have the appropriate regulatory approvals guidelines in place. Just last week, I had a discussion with one of our BDs, and he told me that he had missed an opportunity due to the fact that we didn't have an M-SAN HQ GMP version on the market. We are now removing this hurdle, and we are already now expecting that we are able to accelerate sales of M-SAN during Q4 and on to 2026. It's not all about cell and gene therapy. Our goal is also to build and expand our biomanufacturing portfolio in order to diversify. Here we're looking into RNA, as we've talked about earlier. Our first RNA restriction enzyme is in development.
We published a poster last year on this enzyme, generated a lot of interest from potential both customers and partners, and currently we are in discussion with a number of partners in regards to go-to-market and possible co-development opportunities. A very, very exciting field, but also a field where we have to ensure that we develop the right product with the right specs for the right customer. Going into a collaboration with a potential partner might be the right way to do it for us. Long-term, of course, 2026 and beyond, we're going to continue to invest in innovation, also of our molecular tools portfolio. As we are seeing the customer base is growing at the moment, we also have to be very prudent in regards to operational scalability. We want to be able to meet the demand.
We are going to start to discuss upscaling possibilities of some of our nucleases in collaboration with an external CDMO partner. Last but not least, M&A opportunities have also been on the table for quite some time long-term in regards to building a broader portfolio, strengthening manufacturing capabilities, strengthening our innovation capabilities, as well as enhancing our commercial channels. Next slide, Børge. This is an update on partnerships. As mentioned, it's great to see another CDMO onboarded, this time with SAN HQ on their AAD platform. This is done in their center of excellence in the U.S. We are expecting the initial projects in Q3. As already communicated, we are in close partnership with a CDMO in the UK that has implemented M-SAN HQ in the lentiviral vector platform. Once M-SAN HQ GMP is launched, they are gradually going to transfer to that nuclease. We expect initial projects to kick off Q2/Q3.
An interesting development is also that we might be able to take this beyond early phase projects and also go into projects that are closer to later drug development stages and also thereby closer to commercialization. That, of course, makes the revenue potential long-term more interesting than we originally thought. As we speak, we are also working with a third CDMO to implement SAN HQ on their platform. Currently, the nuclease is being evaluated at an early process development stage. A lot of positive momentum in regards to CDMO partnerships and a lot of positive momentum also in our ability to go direct to customers in terms of broadening our customer base. In regards to OEM, we've talked about that previously. We've had a close collaboration with a potential partner. They did an audit in Tromsø on the 15th, and we passed that audit without any major deviation.
We have decided to discontinue this collaboration due to partner-side operational challenges. The partner had to invest significantly in developing their own data, and that would prolong the launch date. The margins that we were able to provide the partner turned out not to make a collaboration feasible going forward. We're still actively working with other partners. We have optionality, and we are also looking into if possible selected distribution agreements make sense. What is the main message is that our biomanufacturing customer base is stronger than ever, all-time high, and the recent CDMO platform integrations, as well as all the positive dialogues that our BDs are having at the moment, that really instills confidence in me and the organization in general that we are going to be able to grow the biomanufacturing business for 2025.
We saw a quarter-on-quarter growth also for biomanufacturing during this first segment of the year. With that, I would like to ask Paul to share more about the customer-centric transformation. Paul is in the process currently of building a world-class team that works according to world-class standards. I think we are seeing the first early indications that Paul and team, as well as the whole organization that supports the customer-centric transformation, is making progress. Go ahead, Paul.
Thanks, Michael, for that introduction. Yes, I've been in the company now for around seven months, and I'm really delighted to see the progress that we're making and the impact that we're having. It's really quite significant. I'm seeing progress in our motivation, our customers' motivations, general excitement around our enzymes, and massive improvements in how we do business and the rigor that we've got around that.
If you'd allow me to walk through some of those aspects before we get to the sales revenues. Next slide, please, Børge. I'm going to take a moment really to highlight where we are in terms of our commercial transformation, our commercial journey, because we are seeing real traction. First, on the left, you'll see that we've got foundations in place now. We've made real progress during Q1, and the commercial team and the wider team is executing with greater discipline. We've tightened up our internal alignment, and we've laid this sales and marketing groundwork and the expectations of how we're going to scale the business. Michael alluded to this, but what we're seeing in the market at the moment is really exciting. Customers are not just curious about our enzymes. They're trying them. They're starting to validate them, and they're starting to adopt them.
We've got multiple mid-stage projects underway, and biomanufacturing is really leading the charge here. We've got some great indicators of long-term adoption. We are really well positioned, and our go-to-market investments that we've made so far are really expanding our reach and the nature of our customer engagements. We're strongly influencing key accounts, and we've got great internal alignment through the customer's buying journey across our commercial, our product, and our technical teams. It's really clicking. I'm really satisfied with the progress we're making. We're staying focused on what matters the most, though, and that is, as I said last time, feeding the funnel and supporting our customers at every stage. We're driving adoption of our enzyme. We're driving new projects. We're accelerating what we're calling design in, and we're really positioning our exams for future reoccurring revenue as these customers' programs advance.
We are planting a lot of seeds, but we're also seeing a lot of growth, and we do know how to scale it. The bottom line really is that we are building our business strategically. We're gaining great momentum, and we're setting ourselves up for success. There is no shortcut, however. The only way we can build a sustainable business is to feed the funnel. Next slide, please. Design in. I just wanted to capture the core essence of how we grow and really talk a little bit about how customers adopt our enzymes. It's really strategic, and it takes quite a long time. Okay? It's all around customers' projects quite clearly, and it's fairly obvious that the more customers and the more projects we're involved in, the greater the chances of future commercialization and success.
As I keep saying, feeding the funnel is a critical part of this transformation. Typically, what happens is in the first few months, a customer would focus on the technical aspects of our enzymes. They perhaps sample, and we do some kind of guided incorporation and trial of our enzymes into their process. By about months three to nine, things really start to heat up. We would typically allow them to see behind the curtain at ArcticZymes a little more, access to our validation teams, to our quality teams, and we'd make sure that they are gaining the data, they're testing the right things. It is not as simple as just giving a customer a sample. It needs to be far more structured and far more rigorous than that.
Between months nine and perhaps 15, and again, these are just guides, it's really about scaling up with the customer. It's about process development. Typically, our enzymes move from a benchtop environment into a bioreactor. We tend to support audits about this point. And this isn't theoretical. This is how we're actually working at the moment. I'd simply wanted to remind you. This is where customers' confidence builds in ArcticZymes as a supplier. This is a really crucial phase, and we're seeing more accounts enter into these different phases. Beyond 15 months, this is where commercialization and the real revenues start to happen. Our enzymes were adopted into validated workflows. They're locked into standard operating protocols, and we start to see these repeat orders at a meaningful scale. This is kind of the payoff.
To my original point, there is no substitute to building the funnel and finding the opportunities. One thing I'd really like to highlight is the importance of being at the front of a customer's mind when they come to do this initial technical sampling. That is why marketing is so critical for our transformation. Along the bottom here, you'll see this is an example of a well-known CDMO in the U.S. where conversations actually started with our SAN HQ back in 2022. The whole team has done a fantastic job up until the end of last year where SAN HQ TF was validated for use in their platform process. A milestone success here. What's really great here is that this CDMO now sees us as a true nuclease partner.
This year, they're going to be trialing our GMP Neo nuclease, and they're already putting plans in place for next year to work with our M-SAN HQ. Again, this is slightly driven by the fact that we've got GMP coming in the next short term. Next slide, please. What's so exciting now is just how strong and diverse our commercial pipeline has become. Our enzymes are embedded in platform processes at some top-tier contract manufacturers. Early-stage research projects are—can you see my slide? It keeps flashing out—that started years ago and are now starting to mature into active clinical and manufacturing use cases. This is exactly the kind of strategic depth that we've been building towards. Diagnostic companies are also another fantastic story. They're validating our enzymes for their cartridges, for their kits. These aren't just early experiments.
They're actually starting to make commitments for us to incorporate our enzymes. I believe we're in the right conversations with the right partners, and we are positioning ArcticZymes for future growth and future impact. I've got a quote in front of me from another CDMO on the east coast of North America, and that is, "We champion the use of SAN HQ both internally and with potential clients. The data on the Histone H3 protein block was particularly insightful, and it provided a new perspective that we will incorporate as a quality control marker in our AAV purification workflow. We showed data and extrapolated a cost saving of 30%-60% versus conventional nucleases." That is incredibly impactful, incredibly significant, and it shows the level of motivation that our customers have for our enzymes. Next slide, please.
Q1 has marked a massive step change in the way that we do marketing and the importance of marketing in filling our funnel and supporting our commercial efforts. We have invested more in marketing and travel to events and things like this. Marketing is not just a support function. It is part of our commercial growth engine. We launched this fantastic No Love Lost campaign to really bring some emotional punch to the molecular tools side of the business. It is based around human relationships and human connections, and it worked. It has cut through what other life science providers are putting out there. This is testament to the marketing team that we have at ArcticZymes, which is truly, to use Michael's words, world-class. You can see here that we did some social media campaigning.
We got a huge number of impressions, but more importantly, 14% of customers or potential customers that saw our posts engaged with our posts. Not only that, we got over 1,000 clicks through to our website. We hit another milestone, really, because this is the first time a molecular tools page has overtaken the Salt-A ctive Nuclease pages. We also brought this campaign to life at ESCMID in Vienna, and customers really enjoyed engaging with us here. There are several reasons for that. One is, of course, this fantastic booth design, and we continued this relationship theme. We got 93 warm or hot leads with customers that said they wanted to follow up with us about our enzymes. Ninety-three, which is fantastic. This was helped massively by two talks that were given at this conference where the presenters referenced our enzymes. These were metagenomics talks.
A fantastic example of a fantastic, impactful campaign that's going to help us to build that commercial funnel. Next slide, please. I mentioned metagenomics as being the content for the presentation that those researchers gave. This was quite a large part of this ESCMID conference trade show. This is a very quickly emerging opportunity that we're exploring at the moment for our enzymes. This gives diagnostic companies the opportunity to very quickly use sequencing to determine not just the pathogen, the disease-causing agent, but also what treatments might be appropriate for it without the need to culture the microorganism. It's a fantastic diagnostic opportunity. It's not a theoretical opportunity. It's actually happening now. Our enzymes are positioned very nicely within this. We've already involved in and mentioned in a patent regarding this.
We're already at early stages of a national rollout program within a health service. This is really exciting for us. We're still exploring it. Again, we do not want to—we want to get this right. We will get this right. Next slide, please. Next one, please. Let's take a look at our revenue performance during Q1. We reported NOK 23.3 million of sales, which does represent a drop from NOK 30 million in Q1 2024. That decline is—and Michael mentioned this—almost entirely due to one large molecular tools customer who placed significant orders last year and smaller orders this year. In fact, in Q1, they ordered NOK 9 million less than in 2024. This was a known risk. This was not a surprise. It's really important to separate this from the broader performance story.
I'd also like to point out that I am personally handling this account, and I can confirm that there is no material change to their needs. There's no material change to their demand. It's simply that they have enough stock in-house to cover them until H2. Because when we look at the rest of the business, the underlying activity is really encouraging. In America, we grew 20% year-on-year. In APAC, we grew by 145%. MEL actually declined slightly by 13%. We are taking action to rebuild that momentum. They had a relatively strong Q1 2024. The real headline is that we've added 42% more customers during Q1 than we saw last Q1. We've seen a 14% increase in the order volume. That's 37 more unique customers, and that's 31 more orders. I believe that that's proof that our strategy is working.
We're reaching more accounts, and we're doing the right things. We're also seeing a slight shift in geographical balance, with North America now representing just over half of our revenue, which is up from 31% last year. This kind of tells me that our investments in the U.S. commercial team and our investment in the U.S. customer base is paying off. Yes, the top line was impacted by one customer, but under the surface, this was a strong commercial quarter. It showed healthy growth, diversification, customer diversification, and deeper customer engagement. Next slide, please. Biomanufacturing continues to be a major growth driver for us. We saw a 21.4% increase in biomanufacturing sales, reaching NOK 13.6 million this quarter. That's up from NOK 11.2 million in Q1 2024. This represents real commercial momentum. Geographically, North America led the way, showing 29% year-on-year growth.
MEL also delivered a healthy 12% increase. These are really encouraging signals, given that a lot of this growth is coming from newer customer activity, not just from large repeat accounts. Biomanufacturing now accounts for around 58% of our sales during Q1. This is one of the core engines, clearly, of our business. This has been driven by the expansion of our customer base, some new wins, some broad adoption, and some more design-ins. We're actually also seeing demand for our nucleases beyond cell and gene therapy. Clinical adoption is starting to expand into broader virus manufacturing applications such as viral vaccine manufacturing. That's something that we're strategically exploring. It could open up a new addressable market. For molecular tools, our sales took a step down this quarter with NOK 9.5 million compared to NOK 18.2 million.
Again, this was due to this planned reduction by this one OEM customer, which accounts for NOK 9 million of the swing. Molecular tools still made up 41% of sales, and it speaks to strong diversification in our product mix. We're seeing significant growth in some parts of our portfolio here, for example, in Cod UNG, which rose almost 47% year-on-year. We are doubling down on our efforts here. 2024 was really focused on designing in and on initiating projects with biomanufacturing customers, very deliberately. What we're now doing is we're shifting our marketing effort and some of our commercial effort to cover molecular tools in a more rigorous way. Next slide, please. Just to finish this section on a real high, we have hit an all-time number of unique customers. This is a direct result of the traction that we're building.
You can see in the chart here, for biomanufacturing, we had 107 unique customers in Q1 2025. That is up from 86 in Q1 last year. It is double what we had just five years ago. This is not noise. This is momentum, and this is growth for the future. On the molecular tools side, it is relatively stable post-COVID. We are looking to progress more customers through the molecular tools pipelines to commercialization. It is important that we are not just filling the funnel, but we are also moving customers through it. We are a company that is building sustainable and scalable growth in a high-potential market. Like last time when I presented on this call, I really do feel that we are just getting started. With that, I would like to pass to Børge.
Thank you, Paul, for that introduction.
Michael here for the status of our sales and ongoing activities that we are ongoing in the organization here. Like previous quarters, I will take you through some of the headlines in our other accounts relating to our financial statements. Looking at the financials for the first quarter here, our sales revenues ended up on NOK 23.3 million, as they talked about. It is a decrease of NOK 6.7 million compared to the same quarter last year. As you heard from Paul now, the majority, or basically all of this, the decrease is related to one customer that purchased NOK 9 million less in the first quarter compared to the first quarter last year. We had positive contribution on other revenues here. We were able to recognize almost NOK 1.6 million in other revenues.
NOK 1.3 million of this is related to the grant we were awarded in the second quarter of last year. With the sales and other revenues now, in the first quarter here, we ended up with total sales just shy of NOK 25 million compared to NOK 30 million last year, or a reduction of almost NOK 5 million here. Cost of materials and inventory is at normalized levels with NOK 0.9 million this year compared to NOK 1.3 million at the same time last year. As you remember from some previous quarters, we had some larger expenses on this one. Over the last three quarters, it has been normalized now. Our personnel expenses are slightly higher this quarter compared to last year with NOK 18.8 million compared to NOK 18 million in the first quarter of 2024. We have, however, reduced some of our personnel expenses, especially for the Norwegian employees.
Our expenses for Norwegian employees are reduced by NOK 1.2 million compared to the same period last year. This is primarily explained by the downsizing and the closure of the Oslo office that we did in the first quarter of 2024. You can say, on the other hand, we have increased our expenses for U.S. personnel by NOK 0.5 million. This is also a part of the commercial transformation and investment we have done in added commercial resources here. Capitalization of projects and new product developments have been part of our statements for the last few years. In the first quarter this year, we capitalized only NOK 0.5 million compared to NOK 1.7 million in the same period last year. Hence, there is a difference of NOK 1.2 million that is part of this year's personnel expenses. You can also say part of our personnel expenses are associated with variable remuneration.
NOK 2 million are accrued in bonuses and commissions for the first quarter. If this accrual will be paid out, actually, it depends on performance and achievement of predefined KPIs throughout the year. As you might remember, in the fourth quarter last year, we reversed close to NOK 2 million in the fourth quarter as we did not meet all the targets we were aiming for for the end of the year. Other operating expenses are also a little bit up from NOK 8.4 million to NOK 8.9 million. There are some pros and cons in this quarter. Property, plant, and equipment was reduced due to the closure of the Oslo office. There has also been a reduction in the use of chemicals throughout the quarter here. Our external services are also reduced. As you might remember, we had the ERP project going on for most of 2024.
We expensed NOK 1.5 million on that project in the first quarter of last year, whereas now we expensed NOK 0.4 million. Even though the project as such is closed, there is still a little bit of need for support. The NOK 0.4 million we spent on ERP in the first quarter is primarily related to the first half of the quarter here. We spent also NOK 0.5 million on recruitment. We have still had that recruitment drive ongoing to add commercial resources. That is, of course, adding an extra expense to us that we did not have in the first quarter last year. We have also experienced a small rise in legal costs related to commercial and operational matters with a total of NOK 0.6 million for the quarter compared to NOK 0.4 million in the same quarter last year.
As Paul alluded to, we have also increased our spend on marketing, commercial efforts, travels, stands, and taking part in conferences are now up as well. We ended up on NOK 1.5 million in the first quarter compared to NOK 1.2 million in the same quarter last year. Of course, currency has had an impact on our business as well. We work in a global market, and our revenues will, of course, be impacted by currency fluctuations. Our sales are primarily denominated in both U.S. dollars and in Euros. For the first quarter of this year, 58% of our revenues was in U.S. dollars, and 41% was in Euros compared to 73% and 27% for all of 2024.
Fluctuations in exchange rate that we've seen over the last year, and especially towards the end of the first quarter this year, have had an impact on our profit and loss statements. Based on the US dollars and the euros that we had in our bank accounts, this resulted actually in a net loss of NOK 0.7 million in the quarter compared to a profit of NOK 0.5 million last year. There is a delta of NOK 1.2 million here. On the other hand, our trade receivables are also impacted by currency fluctuations. This can also be seen under other operating expenses. For the first quarter this year, our other operating expenses were actually increased by NOK 0.5 million due to the strengthened Krone against the US dollar and Euro towards the end of the quarter here.
At the same time last year, we had a reduction of NOK 0.6 million, leaving us here with a delta of NOK 1.1 million. If we are to adjust our other operating expenses and take out the currency, our expenses would actually have been NOK 0.2 million lower than the same period last year. With the sales that we talked about now and the expenses that I've touched upon as well now, our EBITDA ended up on NOK 3.7 million versus NOK 2.3 million in the same quarter last year, which is also a slight reduction from what we saw in the fourth quarter this year. Looking at the graph on the left-hand side, you can also see that our EBITDA margin ended up on minus 16% as a combination of lower sales, higher expenses, and some currency headwinds in this quarter compared to what we've seen over the last few quarters.
The cash balance and the changes in cash have been fairly stable over the last few quarters. You can see that from the graph here that our cash and short-term investments have been around NOK 240 million on a steady basis here. Changes in cash and short-term investments were negative with NOK 1.3 million in the quarter. This is explained that we had a cash change of minus NOK 2.3 million, but our short-term placements in low-risk interest mutual funds were actually positive with NOK 1 million, leaving us with a net change of NOK 1.3 million here. With a strong financial position, still a lot of cash in our bank accounts, I will hand it over to Michael now to round off this presentation before we take on some Q&A.
Yes, thank you, Børge and Paul, for giving us further insights in both the commercial activities as well as the financial statements. If we look into 2025 and beyond, then it is very, very clear to us that the opportunities are still plentiful in a somewhat dynamic macroeconomic environment. What we are seeing is that we are having a lot of great positive dialogues with customers. We are seeing that the pipeline, as Paul also alluded to, is growing. We also have to be absolutely clear on the fact that we still have a lot of ground to cover. We are just tapping into the biomanufacturing nuclease market. Today, the majority of companies out there use a conventional nuclease in order to manufacture their viral vectors. SAN is growing. We have seen competitors come out also with products that are salt tolerant.
That has also been an important thing for us in order to ensure that there are more companies that are highlighting the benefits of using Salt-Active Nucleases. We are just starting out in regards to capture more market share in the general nuclease market. I'm pleased with what we have seen in regards to the customer-centric transformation. The customer base, as Paul also talked about, is expanding. It's at an all-time high today. That also means that we've seen early indications that our investments, our strategy in regards to focusing more on getting closer to the customer is paying off. This also means that we in the future quarters are going to continue to invest in the organization and also in commercial activities. We believe that this is the right thing to do, even though on a short-term basis, it might have an impact on the profitability.
I'm also very pleased to see the CDMO progress that we've made, the two platform integrations that have been implemented. I'm sure that we're going to be able in future quarters to share some exciting updates with you on how those two partners are progressing in the usage of our enzymes. We are working on onboarding more CDMOs as we speak. It is an important way for us to reach more customers. If we look at innovation, then we are going to launch our new GMP-grade nuclease, the M-SAN HQ GMP, targeted for mid-2025. Furthermore, we have an RNA restriction enzyme in development. To round things up, we are still confident in our ability to execute on our strategic priorities and create long-term shareholder value. With that, I would like to thank you for listening.
Now we are going to open up for 10 minutes of questions and answers as we had our hard stop at 9:30 A.M. I see we have a lot of questions. If we do not manage to get around to your questions, please send an email to investor@arcticzymes.com, and we are going to be able to get back to you. Let's get it started, Børge.
All right. We'll get it started. One quick question here. How are sales tracking into the second quarter now? As we talked about, there's been high activity levels already in the first quarter. How are things looking into the second quarter?
Yeah, that's a great question.
I think I'm going to give that question to you, Paul, to talk a bit about what you're seeing, not just in terms of absolute numbers, but in terms of activity generally in April 2025.
Absolutely. I think it's fair to say that we've had an incredible April, a fantastic first month to the quarter from a revenue point of view. What we're seeing is where we have commercial effort, where we have business development activity, we're seeing incredible growth, especially in North America and especially in biomanufacturing. We've had an incredible April is the short answer without getting into the details.
Okay. You've also seen you can see a consistent decline within the molecular tools over the last few years. Have you taken some main actions to turn this around, or what are the explanations behind this reduction?
Yeah.
There's, of course, been a clear focus on developing the biomanufacturing part of the business. We saw and see that we have a unique opportunity within that space. We are a small organization. In order to capitalize on the largest opportunities, we have had a regulatory run in regards to developing GMP-compliant products. Now we are turning the page, the campaign that Paul talked about, the DNA breakup campaign that's targeted at molecular tools customers. It is also very much to do with the fact that the largest customer we have has had a dip in sales during the last quarters. As mentioned in Paul's talk, we see that there's nothing materially that has changed. They're still ordering the same exact enzymes, but we expect to see the next orders from this customer during the second half of Q2.
Molecular tools remains an important business area for us. As you saw on the strategic priority slide, we are also lining up a new portfolio of R&D projects that we are going to be working on.
Okay. Thank you. Is it possble to quantify the impact on revenues of the two CDMOs that you have enrolled now in the second quarter here?
It is still very early days in regards to that partnership. We know that it is going to progress very positively over time. The majority of projects that are going to be implemented, where our enzyme is going to be implemented at first, that is early-stage projects. As I also alluded to, we actually also now, after having dialogue with one of the CDMOs, recently see the potential of actually going in also in some later-stage projects.
It's going to be very exciting to track that development. We are seeing that the results that CDMOs and, in general, our customer base are getting with our Salt-Active Nucleases compared to the dominant conventional nuclease out there are outstanding. Outstanding in terms of yield, outstanding in terms of cost reduction, and outstanding in terms of a better safety profile for the patients at the end of the day. If you look at the main drivers behind increasing the adoption of cell and gene therapy, then it is to lower the manufacturing costs. Our nucleases, Salt-Active Nucleases, tap directly into that trend, directly into that development. That's why we are really well-positioned for the future development within this space.
Okay. Here's a little bit of a broader question. Coming back to since 2022, you can see our revenues have been on a declining trend.
Can you reflect a little bit on what's being done to kind of reverse this trend and kind of the actions that you plan on moving forward? I think you have talked about somewhat as well.
Yeah. I think going back to our strategic priorities, that are the main activities that we are taking to turn the trend around. It's about having the right products, namely having GMP versions of our SAN enzymes. It's about having the right team. It's about engaging and understanding our customer base better. It's about working with lead generation. It's about having the right scientific documentation in place. All those things, the right products, the right team, the right processes, and that is the core focus of our strategic priorities. It is a business where things take time, as Paul alluded to.
I've been in the business now one and a half years. As you can see, illustrated by the process development with one customer, once you get in, it's a two-year project before you actually start seeing significant revenues. We are on the right track. As mentioned, we have started on this journey. We are on the train. We have left the platform, and we are getting closer and closer to being able to also show a tangible positive revenue development.
You talked about the increased commercial team here. Can you say a little bit about kind of the internal KPI settings for team members to drive growth here in the organization?
That's a question for you, Paul.
Yeah, absolutely.
I mean, of course, that's something that we've really incentivized the entire commercial team to do in 2025 is not just focus on the immediate revenues, important as they are, but we've built into that commission scheme a number of factors: new customer intake, quality opportunities created, customer retention, number of supported customer trials, feedback on samples, and then additionally, forecast accuracy. Those factors are something that are critically important to drive the right business, to drive the right behaviors. There are things that we've incentivized the entire commercial team on.
Okay. We have kind of a little bit regarding the global situation we are around. If Trump adds a lot of tariffs on our products tomorrow here, what would we do? Would we consider moving part of our production to the U.S.? Is that a possible solution?
It's at least not a short-term solution. I think, Børge, I'm going to give that question to yourself. What impact on the business do you think that tariffs might have?
Yeah. I think we are, of course, monitoring this situation. Currently, there's not a huge risk, but the risk is definitely there in the future here. We are not really sure what's going to happen. We continue to export our products to the U.S. like we always did. We haven't seen a major increase or any kind of major upset in the way we have done our business. It is something that we need to monitor in the following quarters. We are considering mitigating actions if there should be a major impact on our—you can see on the way we import our products to the U.S. here.
We have not considered to move production to the U.S. at this point in time here.
I think we have to end now, unfortunately. I know that there's a lot of questions that we haven't been able to answer. If you don't feel you've got an answer to your question, write an email, investor@arcticzymes.com, and we will get back to you. It's important that your questions are answered. With that, thanks a lot. Thanks for your attention. Thanks for your support. We look forward to continuing to give you updates in different.