So good morning. Welcome to the Q1 presentation. Both Birger Sovil, our CFO, and I, Jethro Holder, the CEO, will walk you through the presentation today. As this is a virtual meeting, we would kindly ask you to mute your microphones during the presentation, And then we can unmute them at the end for the Q and A session. For those calling in by phone, you can unmute your microphone using star 6.
We'll also kindly ask that you, also switch off your videos, if that's possible. That ensures we have the best bandwidth we can for the presentation today. For the agenda, here, we go in the usual fashion where we go through the highlights for the quarter. Then we will move on to giving you a business update. Birger will orientate you through the financials, And then we're finished off by quickly.
So for the highlights for the quarter. What we see is, for Alexeym, this is actually our Q1 as Fluor Enzymes company. And for us, it's been a challenging quarter. We've actually achieved our best, quarterly performance ever, achieving NOK 40,400,000 in sales for the quarter. Profitability remains strong.
We've achieved NOK 25,800,000 in EBITDA. When it comes to the 3 segments, the market segments we serve, each of those has grown. And what we've also seen in particular, the molecular research sales we're seeing now is starting to reestablish to pre pandemic levels. On top of that, we've successfully upscaled the manufacturing process of our SAN HQ Ensign, by over a 100 fold factor. And that's very important in driving future sales.
So we're going to dig a little bit deeper into each of these as we move through the presentation. So for the business updates, we will start in usual fashion by going through the commercial segment sales. And as mentioned earlier, we have achieved our best ever quarterly sales performance. For the quarter, collectively, the enzymes business grew 119% compared to Q1 last year. When we go into the segments, the therapeutic segments, this is therapeutics.
This is where we serve other companies who are developing gene therapies, and vaccines based on virus technology. So for the quarter, we grew the business by 36% compared to Q1 last year. Therapeutics made a 25% contribution to Q1 sales. We talked about Rietera in the past. Rietera is an Italian company who is developing a COVID-nineteen vaccine, and they are using our SAN in that manufacturing process.
There's been a lot of them, a lot of information talked recently about them in the media. And they have now initiated a Phase 2, Phase 3 clinical trials. And there is an expectation out there that they will market the vaccine before the end of this year. So that's an update on Rio Town. We also had 2 large sand customers audit us during the quarter.
They conducted a GMP audit of the Trump's operation up here. And this is very much a mandatory process for them, because they need to qualify us as a long term critical supplier. Is also a prerequisite before seeking regulatory approval. And we really welcome audits. It's I think customers here is an important thing for us.
At the end of the day, we learn a lot with each audit. It allows us to strengthen what we do because we learn we implement some of the learning from that. And it just makes us much stronger and more relevant as a commercial supplier. When we look at the research and diagnostics segment here, we grew it 176% for the quarter compared to Q1 last year. Overall, this segment contributed 75% to total sales.
If you look at the split, 2 thirds of the sales for this segment came from molecular diagnostics. So this was really the main driver for sales this quarter. And the main product there was COGNG. However, some of our other products such as the proteinases, the polymerases, the DNases, also there, in driving existing and new business opportunities. We also signed a new supply agreement, with a relatively new customer of ours, who's a molecular diagnostics customer in the US, they're developing a multiplex diagnostic platform.
And basically, multiplex is just a word for doing simultaneous detection of several things at once. And so what they're doing is developing a platform to detect COVID-nineteen and other respiratory viruses. We've already seen a small contribution of sales from them during Q1. Molecular research accounted for 1 third of the segment sales. And this is good news because this is the first indication that the molecular research sales have started to reestablish to what we've seen pre pandemic.
We do anticipate large fluctuations to remain in a molecular research business, despite it being reestablished. This is no different than before. The business was choppy before the pandemic, And it is and this is part of doing normal business at the end of the day. So, what contributed to this? Well, we've seen several large orders coming from all geographical regions.
And that was mainly related to the recombinant shrimp alkaline phosphatase enzyme we have. And that, again, that product has traditionally fluctuated from quarter over quarter because we have some larger substantial orders that will come in typically 1 quarter and not other quarters here. Would like to give you an update on COVID-nineteen related sales. And what we're seeing now is the majority of sales we have today is a result of recurring business. These are orders coming in from the same customers on more on a regular basis, rather than those one off orders that we've seen last year.
So now we're starting to establish a base of numerous customers, which which will have long term business in this area. And these customers are the ones that have developed robust COVID-nineteen relevant products onto the market. So effectively, what we're looking at, we actually have fewer customers than we had last year when it comes to COVID related sales. However, we are supplying those companies that will drive long term value here. Also, Just to put some perspective on it, you know, rDesigns is also serving 1 of the largest providers of COVID-nineteen tests as well.
When you look at the contribution, COVID virus related sales contributed 41% towards total Q1 sales. And of that, the majority of those sales were towards the molecular diagnostic testing segment, towards molecular diagnostic testing. We estimate that to be around about 90% of it. The reason why it's an estimate is we don't have 100% visibility into how our where the products are going, particularly with those customers who have historically purchased our enzymes and channel it into different products. So sometimes the customer will purchase our enzyme, it's used in COVID and non COVID-nineteen applications, and we don't have visibility of that split.
So it's always an estimate that we put here. So it's important to bear that in mind. Like all our business, since we do B2B business and deal with large orders, This means that here, we still expect to see quarterly fluctuations continue in the COVID-nineteen area. However, we expect these to be to a lesser extent because we've now started to get a good foundation of reoccurring business. I'd like to say something about innovation and operations.
And the last few quarters, we've been telling you about, we've been scaling up the SALT active nucleus manufacturing process. In particular, is around the SAN HQ Ensign. We've successfully upscaled the manufacturing process of that enzyme now. We've achieved over a 100 fold increase in fermentation yield. And product will be commercially available to our therapeutic customers during Q2.
And this is significant because at the end of that, it really serves customer requirements who require larger quantities of enzyme from a single batch. And this is important to those customers who are approaching commercialization and also those that are running multiple projects. What we're seeing is we in this space, we're seeing an increasing base of commercial manufacturing organizations, who are running multiple projects for their clients, and they will certainly need material from larger batches moving forward. The bottom picture, the bottom right picture is, shows 2 of our proud colleagues. And these two colleagues were very important because they co managed the project from the planning of the scale up process all the way through integration into production.
And, and of course, we had many more colleagues, were involved and it was a job really well done, very well planned, very well executed. What you can see, what they have there, it's a bottle. And And in that bottle, that's a fraction of the material that has been downstream processed and represents the 1st validation batch. In terms of the innovation pipeline, that's progressing. We have several products that are anticipated for launch be ready for launch during 2021.
We're working on an MSAN ELISA kit that will help support and grow our sales of the MSAN enzyme, which we launched earlier. We're also working on tach DNA polymerases, reverse transcriptases. Those enzymes will be optimised to work with virus based test applications. We're working on new SAM products and other enzymes. So you'll see these gradually come out as we report in future quarters.
When it comes to strategic growth initiatives, Our focus has very much been towards the infrastructure and expansion of R and D and operations. And I want to sort of show a picture of this to the top left here. This shows part of the facilities we've taken over on the ground floor below where Arctic Zymes Technologies is located today in the CEVA Innovation Centre. This will eventually become part of our new production facility. As you see in this photo today, everything's being moved out of it was there.
And now it's really about renovation work is underway to modify the infrastructure here, install new facilities. So what we're going to be doing is we're taking down some walls where we'll be installing new water, having putting the right cold rooms in place. There should now maybe some changes to the ventilation, new firewalls, new doors, all those types of things that you do when you want to tailor a facility for your use. So what you see here will change. And once this is done and the renovations are done and signed off.
We will then start moving in production and laboratory equipment. And then what we will need to do is then validate qualified that equipment before we were able to start manufacturing in this new facility. So there's still some way to go, but we're progressing according to plan. We continue to make incremental investments in hiring new personnel and talent in TRUMPSA. And this is really important because this is about supporting our growth initiatives.
So we're recruiting in different areas. We're recruiting R and D, operations, quality assurance and QC. And that's really important because we are getting more customer audits, our customers are our customer base is growing. And with that, the regulations are tightening up, both in diagnostics and in a therapeutic area. So we will need more support there moving forward.
And also in terms of our customers, we need more support when it comes to order handling and sales on that. So we are going to be putting more support to handle the growing customer base. And these are all good signs. This is all all this is about investing in order to leverage the greater potential from the business. So with that, I'm going to hand over to Birger, and he will orientate you through the financials.
Thank you, Jethro. And as Jethro talked about in the beginning here now, Q1 2021 is the best quarter we've had in our history in terms of sales and profitability. And what makes this quarter even better is it is That is on the back of our historic strong 2020, where we achieved new milestones on a kind of on a regular basis. And also in the Q1, we have continued to support our customers with on demand deliveries and of the highest quality of the deliveries, yes. Going into the safe side of the business.
We experienced a growth of almost 120% for the quarter, generating sales in excess of SEK 40,000,000 compared to SEK 18,500,000 in the same quarter last year. And this is also substantially up from the Q4 2020 figures where we had sales of SEK 22,100,000 or it's almost 100% increase compared to that order as well. And of course, with current sales, we are well on track to beat the SEK 93,000,000 we had in sales for last year. Looking at the segments. For Therapeutics segment, sales grew by 30 5% or close to SEK 3,000,000 giving us SEK 10,200,000 in sales for the quarter.
And it is worth mentioning that the sales are on the same level as we have experienced in the last three quarters. But we do have expectations to grow this number moving forward, even though we know that the quarters will be a little choppy. For the Research and Molecular and Diagnostics segment, we experienced a substantial increase of 176 percent in revenues here or up from SEK 11,000,000 in Q1 2020 to SEK 30,300,000 in this quarter or an increase just shy of SEK 20,000,000 compared to the same quarter last year. And of course, as presented earlier, we experienced for the Research segment, If this is a catching up effect of underlying growth remains to be seen, but we expect this to be partly driven by But we expect this to be partly driven by a cashing up effect. We have also experienced larger orders from customers that normally only buy products maybe once a quarter or not that many times each year.
And as Gretchen also said here in the beginning, we do expect large fluctuation in this area moving forward. It is, however, worth mentioning that currency effects has been negative in the quarter by almost SEK 500,000 as we see that the NOK has been strengthened toward our main sales currency, USD and euros. Moving into COVID-nineteen rated sales. And as with some of the previous quarters, COVID-nineteen COVID continues to impact our figures and the Q1 is no exception to this. An estimated 41% of quarterly sales or SEK 16,500,000 of quarterly sales are considered to be COVID-nineteen related.
And as Jeshua also said, The majority of these numbers are associated with molecular diagnostics, but a small part of this can also be associated with vaccine producers. Yes. And for the quarter for this quarter, we have also introduced A new graph showing how the business has grown using a 12 month rolling average calculation. And this is to take out some of the choppiness of the business here. So you can actually see a little bit how we are growing.
From the graph above, you can see that growth has been steady over the last 3 years with a boost in 2020. We have continuously grown sales from an average of SEK 7,500,000 in 2018 to a calculated average of SEK 28,000,000 in 2021 Q1 2021. We have also tried to show how the business has grown without the COVID-nineteen effect. And based on the graph above, sales have grown to almost SEK 20,000,000 in the Q1 of 2021. It is important to highlight that we have not done any calculation on the negative effects of COVID-nineteen as it is challenging to say how things could have been without the corona.
But one of the things that is challenging to calculate is the measure challenging to measure is the consolidated effect of researchers leaving the benches in 2020, for example. And of course, if we are able to continue with the trend we are experiencing now remains to be seen. But as Jescho said Earlier, we are investing in organic growth initiatives to sustain this growth moving forward now. Looking at the profitability side of the business. Q1 was stronger than anticipated both in sales and on profitability levels.
And as presented in previous slides, Sales grew by 119%, while EBITDA grew by 194% to almost SEK 26,000,000 for the quarter versus only SEK 9,000,000 in the same quarter last year. We also managed an EBITDA margin of 64% for the quarter, which is in the high end of expectations. But due to the fact that we are investing in the business now, our expenses will continue to grow. And for the Q1, operating expenses grew by SEK 4,000,000 from SEK 11,000,000 in Q1 last year to SEK 15,000,000 in this quarter. And of course, this increase is explained by growth in personnel expenses, increase in property, plant and equipment expense and Expenses related to external support needed to drive our growth initiatives that we are working on.
Our cash balance continues to be strengthened on a quarterly level with a change in cash of SEK 23,000,000 for the quarter. Of course, this one is driven by the final settlement we received from the divestment process of SEK 16,000,000 at the end of this quarter. You can also see from the table above that our changes in cash is bumpy And especially, you can see that from the Q4 last year. But as most of you remember, we divested Biotech Beta Glucans for SEK 70,000,000 in December 2020, giving us a solid cash contribution in that quarter. With the changes we've experienced in the Q1, We generated a cash balance in excess of SEK 160,000,000 at the end of the quarter, with the expectations to strengthen this even further in the coming quarter as especially Q1 sales are being settled now.
And with this note, I will hand it over to Jethro to give us some further input on what we can expect for the remainder of the year.
Thank you, Birger, for orientating us around the financials. So for the outlook, as mentioned earlier, we are now in 2021, and we are a pure enzymes company. And now our brains have changed. Our brains are all set on with our undivided attention on enzymes. So The outlook I presented last time is the same as before.
It's unchanged. And there's 4 key areas we're really focusing on. 1 is about performance. This is about the top line sales growth. And I think you see that in the numbers already in Q1.
And when you look at what's really fuelling this growth, it is our customers. That's the most important thing to us, our customers. And when you look at our customers, we are serving 3 market segments, each with different dynamics, and they're growing and they're innovative. So we're serving therapeutics, molecular diagnostics and molecular research. We also have a growing customer base supported by over 300 customers.
And that just continues to grow. And as we launch more products, Dalio even open up more opportunities to reach customers we can't reach today. And lastly, we are expanding our product range and of course, ramping up our innovation efforts to get more enzymes into our portfolio. So all these things are which fuel the top line growth. Secondly, it's about profitability.
We are enzymes are high value enzymes, high margin products allows us to be profitable. And so their focus remains on increasing that profitability. And that goes hand in hand with top line growth. Of course, we want to leveraged the greater potential out of the business. So investment is really important.
And you've already seen, we talked about that today, 2021 is a year of investment. And we're investing, as you've seen, in expanding facilities, as well as talented personnel. And I think, as you saw, Berge has already demonstrate and show and that we've already increased our expenditure there in more personnel and external services. New innovations are very important because today we do have a limited small portfolio that's driving our sales. So there are parts of the market we cannot reach today.
So new innovations are important to really allow us to take more of the value chain moving forward. So with that, we are ramping up organic growth. We're putting more people in to allow us to ramp up our innovations. And that is to allow us to eventually achieve and complete portfolio offering of molecular biology enzymes in the next 2 to 3 years. And on top of that and down the line, merger and acquisition will also be important to realize this goal as well.
So with that, I would like to say thank you for your support. And also I'd like to quickly say thank you to the team for a job well done. I want to I'd like to also remind you that we have the Annual General Meeting on the 20th May. So please look out for those announcements. And with that, I'd like to now open for questions and answers.
So, anybody calling in, you can unmute your microphone using star 6.
Yes, good morning. Can you hear me? Yes. It's Peter Rosking from Pareto Securities in Stockholm. Firstly, Congrats for extremely strong quarter.
I think that Q1 sales probably exceeded even the most positive Expectations, so very well performance there. Just a couple of quick ones And then I jump back to the queue. You always state that sales will fluctuate between the quarters. In this Quarter in this presentation, you say that the fluctuations will be slightly less and many of the one Off orders that you saw in 2020 is now becoming more recurring ones. So I'm just wondering What your visibility is when it comes to sales in 2021 And if we could expect that this level of sales between, let's say, CHF 30,000,000 CHF 40,000,000 is The new normal going forward.
Thank you.
Yep. So thank you, Peter, and there's several things to answer there. So, I'll start top level first. I think, as you rightly pointed out, this exceeded our expectations. And, and, yeah, we never expected this, and that's sometimes how it is.
And I think, you know, there was a strong, contribution, of course, from COVID-nineteen sales there, that attributed to that overshooting as we saw it. But when comes to fluctuations, it's in general, that's the nature of doing B2B business. We're not there to serve €50 orders. We're there serving large bulk orders to our customers who, many of those orders are in excess of a NOK 1,000,000. And that's across all the segments.
That's in the therapeutics, in molecular diagnostics and in molecular research. And particularly for some of the largest customers, you know, some of those will purchase maybe one time a year. Others may be purchased twice a year. Others, other customers purchase every month. And that's why you have this volatility in sales, and it's across all three segments.
And on top of that, you have different market dynamics as well between those three segments. And then I think, you know, this is sort of And of course, then you have the COVID effect as well, which did put, the, if you put, it put some turmoil in the market in 2020 and some unpredictability. So I think here when I talk about less fluctuations, and that was purely for the, COVID-nineteen. Those fluctuations will continue because we do have customers purchasing large amounts, and that might not come every quarter. But we know they're regular and we have visibility to that.
But the good thing there is why it's going to be less choppy is because we won't have those one borders some of those customers who launched COVID tests or had ambitions around COVID weren't successful in 2020. So that business has gone away. And it's always what I said, going back to this time last year, we said with COVID-nineteen, what we want to do is work with those customers who will be there for the long term. And that's what I talk about when I say reoccurring business. That's what we've achieved today.
We're now working with those customers that are going to have robust COVID-nineteen Technologies on the market now. And that's what's reflected in our numbers now as opposed to these one off orders. But despite that, those fluctuations will still be there in all of the 3 segments that we serve. So there were several questions there, but I hopefully
forecast, are they always wrong? Or Forecasts, are they always wrong or is the visibility for a couple of quarters ahead pretty good?
Yes. So we plan our annual budgets on a quarterly basis, and that's along with our customers. So we have with many of our customers, we have contracts. In those contracts, our forecasting mechanisms we have with our customers. So we work around so of course, we work our budgeting is very much planned around what our customers' expectations are, but of course, customer expectations can change.
And of course, they can sometimes change those forecasts and things like that. And of course, then you have those things out of the blue as well. So there is a lot of science and a lot of thought in preparing that. So yes, we do have good visibility. But of course, things happen in the market and of course, which sometimes impact our customers.
So you have good foresight, but not foresight.
The sales level that you achieved This quarter, do you think that is extreme at this point of time? Or is it a new level That you have established going forward and it will oscillate around that level?
I think this is a I think going back to what we said earlier, this is unexpected this level. But of course, we do expect growth in quarterly sales to previous levels. So I think you need to look in between dream notes. And of course, there's always those kind of things where you have the unexpected as well. So I think I would say, look at the historical quarters we've had and look at what we achieved now.
And that's the kind of expectation you should see. We are we said we're going to grow this business. This is what we're doing. But of course, sometimes we will have like what we saw in Q2 last year. And we have I think this is so we'll see this fluctuate.
But of course, down the line, of course, we do want this business to grow with sales bigger in this quarter, And that's on the call to do that.
So I
think that's the best answer we can give.
Looking at Q2 last year, do you expect year over year to show growth He will discuss that.
Yes, year on year, that's certainly yes, that's what we've said this year. It's So I think last quarter, we mentioned that going into this year is really about exceeding that £100,000,000 in sales. Yes, of course, we had 94,000,000 last year, if I recall correctly. And of course, we want to and of course, we want to go it's always been a goal to go beyond the CHF100 1,000,000. Originally, we had that on the cards for 2023.
That was our guidance a few years but of course now we can move that forward and confidently say this year will be the year where we go beyond SEK 100,000,000.
On the just taking that a little bit further, in December 2019 when you more or less started the journey that you're on now and presented the new business plan. You also established this 6 year plan where you said that you would have around or above SEK 180,000,000 in sales in 2026, do you think that if things are proceeding like In Q1 that this number is needs to be updated.
Yes, yes. I can I think I've alluded to that in previous quarters, that like there were 2 targets there? 1 was a CHF100 1,000,000 in 2023, then it's in 2026 was CHF180 1,000,000 And those I think that's our guidance and that is no longer relevant. We will achieve those target numbers earlier than that. And again, CHF 100,000,000 we will exceed that in this year.
That's our goal. And then, of course, GBP 180,000,000 it will certainly be before 2026.
Okay. I jump back into the queue and let somebody else ask questions. Thank you, Jesper.
Thank you, Peter. Thank you.
Any other questions?
Yes, hello. It's Telefair, you too. So difficult to find the words today. Congratulate with a fantastic quarter. No offense, but Looks like we are entering the Super League.
I wouldn't be telling that story.
Well, I don't have so many questions today, but just enjoy the day and congratulations and To all of you in the company, it's fantastic.
Thank you, Telef, and thank you to all our investors for your support.
Adej Seglone, Handelsbanken Markets.
Yes, I can. Hello.
Good. So a couple of questions, please. And with less than 10% of COVID-nineteen related sales coming from vaccine producers, help me understand the potential upside if and when Reitera's Vaccine becomes commercial. So that's the first question.
Yes. So what I could I'm not going to answer Realtura specifically because we do have confidentiality with them, and I don't want to get into trouble there. So I'll talk more general, if that's okay. So and what we've seen, and if you just look at what we've achieved so far, Yes, when you go back, the largest order we actually expedited to one of these therapeutic customers, has been NOK 3,000,000 in a single order. Actually, last year, we had several customers who purchased reached over NOK 5,000,000 of SAM products.
And What we're seeing as well, we've seen many customers who are regularly purchasing NOK 1,000,000 products. And some of those purchase not every corner. So that sort of shows why the numbers are up and down. What we are and none of these customers are commercialized. That's what's important to understand.
When they commercialise, and we haven't given that none of our customers have commercialised yet, but when they do, whether it's in a vaccine space or in gene therapy, we have an estimate that annual sales with those customers will be between NOK 5,000,000 and NOK 10,000,000. And that is a window because each customer is different. Some customers are just focusing on developing 1 gene therapy or one vaccine. Others are commercial manufacturing organisations. And actually that is growing in the market.
What we're seeing in this arena is that there is not enough capacity in the market to make these vaccines. Hence why you're seeing commercial manufacturing organisations springing up. And actually, we serve many of those. And of course, so there, those ones will be the ones that will be serving many clients who are developing virus technologies. So those are the ones that are probably be topping at the 10,000,000 kind of sales.
And then the ones that are just developing single indications will be around probably the £5,000,000 kind of sales, but it really depends on what disease they're targeting, things like that. So that is just a rough that's just a rough kind of ballpark where we consider business to be and those customers win. One last thing you've got differs not all these customers will commercialise. In therapeutics, it's very binary. Either you will get approval of your clinical trials or you won't.
That's different to the rest of our business. So some of those customers will drop away, but I think we have a large enough funnel and sales funnel that you won't necessarily see a big drop in sales, but the growth directory will change as customers, as we mature that business, and and we get the winners and we see who the winners and losers are. And that's just the nature of therapeutics. So hopefully that answers the question for you.
Sure. And secondly, has the COVID-nineteen revenues from diagnostics open up doors in terms of product development into new non COVID-nineteen diagnostic tests With customers who may not have pursued that otherwise, I mean, has that led to opportunistic new situations for you and an anecdotal
Yes. Most definitely. I think here this is within our existing customer base and new customers. As I alluded to earlier, we signed supply agreements with a US customer and led developing COVID-nineteen tests, but also they're looking at including other respiratory viruses too. So I think all in all, what COVID has done, it has put a lot more focus on infectious disease and in particularly viruses.
So I think in general, for infectious disease, viral diagnostics, has become much more relevant, because, you know, this isn't, you know, I don't think COVID will be the last virus to be troublesome for the world, you know, where we're seeing, you know, others before it. And again, you know, it's not only viruses, it's bacteria as well. And of course, we have enzymes that fit very nicely with with Bacterial diagnostics as well. But I think what COVID has done is really, you know, opened up the door and Open Minds, so actually we need to take infectious diseases more seriously. And so you'll see more opportunistic stuff coming in beyond COVID there.
Got you. And just lastly, and I probably should know and understand this, but I don't, so I ask anyway. So there's a lot of discussion around improving influenza diagnostic tests beyond this pandemic because the currently available ones is not very Predictable. Your technology base, would that enable, assuming influenza testing would be more Prominence, I'd say, would your technology enable that?
Most definitely. At the end of the day, we've been in Virol Diagnostics since I've been in the company. I came in the company in 2015, and we already had a nice base of customers using our enzymes in virus diagnostics from anything from HIV to hepatitis C testing, yeah, influenza, other respiratory viruses and that lot. And, of course, it's only really become on the map now because of COVID. So Across the board of viruses, our enzymes can be used.
Perfect. Thank you so much.
Thank you.
Hi, Jethro. It's Peter Oskin from Pareto Securities again. I have a Couple of more questions. The other day, one of the large diagnostic players, Abbott, posted close to 120% growth in their diagnostics business mostly related to COVID-nineteen tests and their point of care platforms. I was just wondering, they said that testing is now shifting From more advanced platforms to more rapid testing.
Yeah.
And how will that affect you. I noticed that some of their rapid testing platforms are isothermal Platforms, are the demand going from more cod UNG to more isopol or Could you describe how this shift will affect your business in the diagnostic area?
Excellent question, Peter, and a very relevant one. So putting even COVID aside, we saw this Actually back in 2015, at the end of the day, we've seen that isothermal amplification is an alternative to PCR. And Wala and PCR uses more sophisticated equipment. It's not that portable compared to isothermal amplification. There it's much simpler because you can use simple machinery.
It can be used much more remotely. That's why you sort of hear things like in the UK where they're considered using LAMP isothermal amplification technologies at airports and things like that because it's much quicker, it's easier to use. And, and so we saw this, and that's why we developed the isopole family. We started innovating those in 2015 and developed our isopole enzymes to fit into those isothermal amplification technologies such as LAMP. And also what happened is last year and now and this year now, all the patents relating to the use of LAMP technology have expired, which means it's opened the door for a lot of commercial for a lot of companies who jump on the bandwagon to develop isothermal tests.
So I think here, our isopo enzymes, we foresaw this not for COVID, but for the market in general. So we've developed those. We were there at the right time. We have those enzymes. We're further innovating the isopole family, so we'll have new enzymes coming out of the door in the future.
But also with that, CoduNG is still relevant for those technologies too, and some of our other enzymes too, because What you got to understand with these technologies, you know, the amplification, if whether it's PCR, isothermal amplification, is just one part of the workflow. Other enzymes are needed too. And we have some of those other enzymes. So we are there, to be able to, you know, really support this isothermal world, points of care, remote testing moving forward.
Can you say anything? In this quarter, The split roughly between more advanced PCR and isothermal rapid taste testing Platforms?
I mean, this where we are, we're still in the kind of early stages there. So, so, I don't want to I want to be cautious of what I say because this is competitor information as well. So, but of course, a lot of stuff we're doing, a lot of this technology is still early days. We have communicated earlier that we do have some supply agreements with customers developing these technologies as well with our enzymes.
Okay. Just a quick housekeeping questions to end this. How many entries did you have at the end of Q1 and how many do you expect to have At the end of 2021, you've talked about adding people in different positions.
Yes. Berge, can you remember the exact number?
With all the people that we are using both in international and in Norway, we are in excess So I think we're around 36 people now. And we are hiring new people moving forward now.
So will you be around 45 ish?
I think it will be somewhere between 40% 45% at the end of the year. Think that's a good
answer. Okay. The operating cost in this quarter was roughly CHF 15,000,000. Is that multiplying by 4, adding maybe A little bit, is that a good estimate for the annual OpEx?
I think we're going to be a little bit cautious about saying that this is the new base, but we are as we have said, we are investing in the business and we are hiring new personnel. So yes, you can definitely say that I think 15 is definitely going to be in the low end here moving forward. It's not that we expect this to have a major shift in expenses, but yes, we will see a slight increase as we increase the staff And the organic growth initiatives moving forward as well.
Okay, great. Thanks.
And it is incremental and that's what's in so it's a gradual thing and we earmark what we need. And of course And of course, we sometimes you see actually you need to boost up some areas than others because, of course, you know, we're growing. And of course, things coming from customers, which make you think differently and you want to rely on your organisation. You know, your personnel have to be dynamic And you have to have a dynamic organization as the market changes and grows. And that's the exciting thing about this business.
You know, when you serve those 3 different segments, you have to look at that and look at your personnel constantly and be dynamic with it. And we are a dynamic business there.
In your presentation, you didn't talk anything about the inorganic Endeavors that you have alluded to in the past. Can you mention anything about this, Yes. What you're doing in that field?
So I think in the outlook I mentioned at the end, I think there we do This is important. This will go into building that complete portfolio. And I think that for the time being, we are still a small team. So at the moment, we are focusing on those expansion projects getting that done. But at the same time, we still remain opportunistic at the time being, to do a merger and acquisition.
And I think towards later on this year, we will then step up our efforts as we've done earlier. And I think here we got to remind ourselves, when we started the M and A process, we are a different company today to what we were then and we can think differently. But I think the most important thing when we do an M and a, we don't do an M and a for the sake of it. We do it because it's a right, it's a right fit. And it has the right synergies to leverage those revenue synergies from that business we buy.
And for us, it's really about the products they have, and that synergize or are complementary to what we have. So I think here, you know, except we'd be opportunistic, for the time being. You know, if something lands on the table or one of partners we've been talking to, says, hey, we would like to consider moving forward or something faster now, then of course, we would yes, we have potentially entertained those discussions. So it's opportunistic for now.
Okay. Thank you, Jethro and Bergev.
Jethro, this is David Satterlund. Can I just chip in with a final question? Congratulations again. Thank you. Awestruck by the numbers.
Really happy for you guys and for all the shareholders and everyone who are involved obviously. I was just thinking about what Matthias asked about earlier. Potential for sort of a golden age in diagnostics on the back of The increased awareness following the pandemic obviously and the opportunities for you there. Could you talk about sort of the long term impact on a company such as Arctic Science from this pandemic, Not necessarily the COVID testing and vaccines itself, but rather on more general as a general You know, you say me at the end, tailwind. Thank you.
Yeah. Thank you, David. So for us, you know, we've always had a strong strategy in molecular diagnostics, way before COVID came along. And for us, you know, is really about bringing those relevant enzymes to this space. So at the end of the day, when you do a diagnostic test, it uses a sequence of events, which use several enzymes.
And as well as that, we hear a lot about PCR, but that's not the only technology in there. That's just a piece of it, it's just an amplification technology. And so So there's a lot of other technologies that are used, you know, anything from sequencing. There's even things like mass spectrometry, things like that are used. There's genotyping, there's a lot of different types of technologies that are used.
And what's important to us and has always been on our map even before COVID is to become much more relevant. So we bring the complete portfolio enzymes to serve each of the steps of a diagnostic test, as well as the different technologies that are used there. So that's why, you know, we it's going to be a continuous long term projects, so even when we have a complete portfolio with all the major classes of enzymes, we still want to build each of those classes out. Because our customers will require new innovations all the time. So we'll always be innovating the enzymes as we build it out.
But the number one goal right now is to make sure we have a complete portfolio of all the classes of enzymes. So we can tap into all the technologies and all parts of the workflow in diagnostics. And today we can't do that because we have a limited portfolio. So I think here, I hope that was answers your question. If not, please, I'll ask something else.
Well, that's good. Thanks. With regards to the lamp technology specifically, can you look to what Applications or diseases you can apply that to, is it a general testing technology or is it more specific to airways?
It can be used in anything you want to use from detection, LAMP technology can be used in. And I think, you know, if you think more broadly, yeah, here, you know, the virus diagnostics is on is what people are talking about. But generally, LAMP is where it's something you can have batteries in one of these machines. You can take it anywhere. So can fit even into environmental testing, remote testing, you know, testing waters, you know, testing, you know, for for instance, that's just one example.
You know, it can be used even, you know, for researchers out in the field doing ecology studies. You know, there's so much ways this can be used. So the point is you can do you can detect and detect a piece of DNA from remotely. That's the point of the technology. So it's limitless how lamp technology can be used.
It's very difficult to put a PC on our machine remotely. You need to and and set that up. You would need to, you know, have a lab environment where lamp, you can potentially do that remotely in a dirty environment. So I think here, this is a beauty of it. So there's a lot of applications, more than I could talk about today.
But of course, what we want to focus on is really the ones, the applications which will have the highest value here at the end of the day. There's a lot of market areas we could serve, but we don't because we would not be very successful there. So I think it's very important that we are very focused about these things. But Lamp, yeah, sure. It opens up a lot of potential for how to detect a piece of DNA in future from different environments.
And also one area as well is bioterrorism actually. I think here bioterrorism as well. Yeah. When you get a swab in the airport and they put it in a machine, you know, that's, there's a potential later on. And there are companies that have been working on molecular diagnostics, based on lamp technology for bioterrorism as well.
And I think, you know, so I think there is The and of course, then you want something very rapid. You know, but it takes maybe 15 minutes as opposed to 2 hours, to get a result. You don't want somebody hanging around an airport for 2 hours or something. So I think, you know, so hopefully that kind of gives you a broader tip on how these technologies can be used and applied.
Great. Thanks. Can I just ask one more quick on geographical Progress in Asia specifically, you announced a partnership with a Distributor in China in Q3, I think? Yes. Has that resulted in any material sales yet?
Now we've got sales coming in, in China and in Asia in general as well. And I think one thing, actually I didn't say in the presentation and in the report was in Japan. We had a very good quarter actually. There we have actually One of our main customers there has been purchasing our enzymes for a long time. But now they really expect they've now moved into COVID as well and we certainly seen a nice effect to that.
And the important thing about that Japanese customer is also they are very much a well known and renowned company in Asia. So they just they sell really strong into all the Asian countries. So when you look at China, actually, we have I think we've had sales going into China for many years, but we don't necessarily have visibility to that. So I think here, We are pushing, you know, what's new is we're pushing direct now, with, new distributors, new partners. And down the road, at some point, we will then have our own people in China at some point, because it is a very relevant market.
And then that person in China would manage a lot of other partners there because you can't grow China with a one man. You know, you need somebody there to manage the network to grow the sales there. So it is really early days for us. But yes, we are seeing sales in China, but they are our direct sales are starting out. But like I said, I think there has been indirect sales in China through our existing customer base as well.
I think we take 2 more questions. I see Richard and Arne has a question. I don't know if they want to take that one. And then I think we'll try and end this Q and A session.
Thank you very much, Rick. Down the accounts here from ABG Sundal Collier in Stockholm. Hopefully, you can hear me okay. So first of all, congrats to a very strong quarter. I want to touch upon the M and A agenda a bit more.
Given the fact that you do have sort of best In class product portfolio today, are you confident in your ability to find products and technologies and sort of New targets that are at the same level or doesn't dilute the product quality, if you will, in your offering?
So very good question. So our goal is to find complementary products. We don't want something that's going to cannibalize our business. And there are some interesting companies out there that are lean in different areas. And some of the things we're developing and have ambitions to develop, you know, that they already have those competencies.
They know those enzyme technologies very well. And those enzymes will be complementary to what we have. So I think that's the first thing. The second thing, you're right, what we need to do is when we any acquisition we make, we really need to look into the quality and the robustness of those products because, of course, they we do not compromise our brand. You know, we would have to ensure that those products meet that quality level.
If not, then we will elevate it to that quality level at the end of the day. And I think that's always been that's why customers work with us because, you know, we not only do we have interesting enzymes, we have the highest quality, we have good robustness, we have good security supply. So So we'd also have to look into, you know, their manufacturing capabilities. And, and, you know, if we buy somebody, it could mean that we also have to invest in them for them to potentially ramp up their manufacturing capacity and things like that. So these are all the things where we would look at, and are looking at when it comes to M and A targets here.
Great, great. And just a final one from my side. Looking at the therapeutics and vaccines, obviously, it seems like to my understanding that has a big exposure or use cases in the viral space, in the viral vectors, etcetera. And there has been some recent backlash For these technologies looking, for example, at AstraZeneca and Johnson and Johnson vaccines as well as BioMarin in the Viral vector complete response letter, etcetera. Do you see any worries in the field of virals In the longer term, obviously, the pipeline is quite massive at the moment, but you see any worries on the longer term horizon and I guess that Your product expansion will sort of mitigate that potential risk, I guess.
So how should we think about that?
No, exactly. It's a very good Jim and, suspected a question would come up on this, so it's very relevant. At the end of the day, when you look at, you know, how our how our SAN enzymes are used, they're used in in, AAV, they're used in adenovirus, they're used for lentivirus and other viruses here. And of course, what you're seeing is, the things that we're seeing today is very much related to, a DNA virus. And actually when you look at, you know, we're and actually when you look at who we serve, we're mainly serving AAV customers, people you're doing AAV and not at dnovirus.
So I think here, it's a kind of going in different directions, our sales here. But when it comes to adenovirus, you do need to put it in perspective here. You know, it's, This is all new technology, and there will be always, it doesn't matter even in traditional Drug developments, in even when you develop a new surgery, there's always risks. There's always adverse risks. So you need to put these things in perspective.
So, So, you know, long term, no, I don't see an issue here. But of course, there's always risks in everything when it comes to medicine. And I think, you know, there has to be some perspective there, when it comes to that. So even, you know, general surgery has its risks. Being put under anesthetic has its risks.
So I think here, you know, we got it's a pragmatic viewpoint you need to take on this. So but longer term, I don't see any issues. When you look at where what we're doing and what we're serving, you know, viruses for vaccines is just a part of what we're doing here in supporting those customers. Great. Appreciate it.
Thank you for taking my questions. Have a good day.
Thank you. Arne,
one last question. Congratulations, Jethro. Very good results. I have one question about Some in gene therapy. Is it possible to give an estimate of the market share for the project's development in gene therapy?
How many What percentage are you seeing some enzymes?
Yes, it's a good question and a very good question. I'd love to give you an answer. But because of the competitive landscape there, I do not want to say that publicly. I'm sorry about that, but that's just how it is.
Okay.
Okay. I think we are done. Pedro?
So thank you for all the good questions and again for all the support.
Okay. Have a good day, everyone.
Have a good day.